Transition Results and Perspectives of (Un)Healthy Credit Growth in Central, Eastern and South-Eastern Europe
Proceedings of the 19th Annual Conference on Marketing and Business Strategies for CEE, December 2011, Vienna
9 Pages Posted: 6 Dec 2011
Date Written: December 4, 2011
Since the late 1990s financial strategies for opening Eastern European markets and entry strategies of foreign banks in most CESEE countries included triggers for strong credit growth, especially in the private sector. What are the transition results on the macro level? Does this credit growth contribute to financial and economic development or is there a risk of a transition-driven overshooting? We review the literature and empirical studies on financial development, credit growth and economic growth. In Updating Cottarelli et al (2005), we compare the credit boom of the private sector in CESEE during the process of economic transformation to the so called “equilibrium level” and discuss whether or not this credit boom was healthy. We find that results and impact differ across the countries due to country specifics and the different developments of the financial sector. We conclude by discussing policy challenges with regard to financial stability and transition perspectives.
Keywords: credit boom, economic growth, financial deepening, Cottarelli et al 2005
JEL Classification: E44, F36, G21, O11, O16, P34
Suggested Citation: Suggested Citation