Short-Run Dynamics in Bank Credit: Assessing Nonlinearities in Procyclicality

28 Pages Posted: 25 Aug 2011

See all articles by Vincent Bouvatier

Vincent Bouvatier

University Paris-Est Créteil (UPEC) - ERUDITE

Antonia López-Villavicencio

University of Angers - Centre d'économie de l'Université de Paris Nord (CEPN)

Valérie Mignon

EconomiX-CNRS, University of Paris Ouest; Centre d'Etudes Prospectives et d'Info. Internationales (CEPII)

Date Written: August 25, 2011

Abstract

The aim of this paper is to investigate the relationship between credit and business cycles within a nonlinear framework. To this end, we rely on the estimation of smooth transition regression models for a sample of 17 OECD countries over the 1986-2010 period. Our findings show that credit procyclicality is nonlinear, depending on economic conditions. More specifically, credit is highly procyclical in extreme-booms and busts-regimes in Canada, the UK and the US, while procyclicality is less pronounced in one or both extreme regimes in Australia, Belgium, France, Finland, the Netherlands, Norway, and Spain. Our results also emphasize the importance of - financial factors in explaining the short-run behavior of bank credit.

Keywords: Credit cycle, business cycle, nonlinearity, smooth transition regression models

JEL Classification: C33, E32, E51, G21

Suggested Citation

Bouvatier, Vincent and López-Villavicencio, Antonia and Mignon, Valérie, Short-Run Dynamics in Bank Credit: Assessing Nonlinearities in Procyclicality (August 25, 2011). Available at SSRN: https://ssrn.com/abstract=1916691 or http://dx.doi.org/10.2139/ssrn.1916691

Vincent Bouvatier (Contact Author)

University Paris-Est Créteil (UPEC) - ERUDITE ( email )

Mail des Mèches
61 avenue du Général de Gaulle
Créteil Cedex, 94010
France

Antonia López-Villavicencio

University of Angers - Centre d'économie de l'Université de Paris Nord (CEPN) ( email )

UMR7115
Université Paris-Nord
Paris XIII
France

Valérie Mignon

EconomiX-CNRS, University of Paris Ouest ( email )

200 Avenue de la République
Nanterre, Nanterre Cedex 92001
France

Centre d'Etudes Prospectives et d'Info. Internationales (CEPII) ( email )

113 rue de Grenelle
Paris, F-75007
France

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