What Drives Credit Growth in Emerging Asia?

43 Pages Posted: 28 Feb 2012

See all articles by Selim Ali Elekdag

Selim Ali Elekdag

International Monetary Fund (IMF) - Policy Development and Review Department

Fei Han

International Monetary Fund (IMF)

Date Written: February 2012

Abstract

This paper seeks to uncover the main drivers of credit growth in emerging Asia using a multi-country structural vector autoregressive (SVAR) model. Taking a novel approach, we developed a two-block SVAR whereby shocks within blocks are identified using sign restrictions, whereas shocks across the blocks are identified using a recursive (block-) Cholesky structure. We find that domestic factors are more dominant than external factors in driving rapid credit growth in emerging Asia. This is particularly true for domestic monetary policy, which can play a pivotal role in terms of managing rapid credit growth in emerging Asia.

Keywords: Rapid Credit Growth, Credit Booms, Emerging Asia, Svar, Bayesian Estimation, Sign Restrictions, Shock Identification, Credit Expansion, Economic Models, Emerging Markets, Flexible Exchange Rates

JEL Classification: C32, C50, E51, E52, F41

Suggested Citation

Elekdag, Selim Ali and Han, Fei, What Drives Credit Growth in Emerging Asia? (February 2012). Available at SSRN: https://ssrn.com/abstract=2012228 or http://dx.doi.org/10.2139/ssrn.2012228

Selim Ali Elekdag (Contact Author)

International Monetary Fund (IMF) - Policy Development and Review Department ( email )

700 19th St. NW
Washington, DC 20431
United States

Fei Han

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

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