Rapid Credit Growth and International Credit: Challenges for Asia
28 Pages Posted: 19 Apr 2012
Date Written: April 1, 2012
Very low interest rates in major currencies have raised concerns over international credit flows to robustly growing economies in Asia. This paper examines three components of international credit and highlights several of the policy challenges that arise in constraining such credit. Our empirical findings suggest that international credit enables domestic credit booms in emerging markets. Furthermore, we demonstrate that higher levels of international credit on the eve of a crisis are associated with larger subsequent contractions in overall credit and real output. In Asia today, international credit generally is small in relation to overall credit - as was not the case before the Asian crisis. So even though dollar credit is growing very rapidly in some Asian economies, its contribution to overall credit growth has been modest outside the more dollarized economies of Asia.
Keywords: international credit, credit booms, cross-border lending, emerging markets
JEL Classification: E32, F34, F43
Suggested Citation: Suggested Citation