Rapid Credit Growth and International Credit: Challenges for Asia

28 Pages Posted: 19 Apr 2012

See all articles by Stefan Avdjiev

Stefan Avdjiev

Bank for International Settlements (BIS)

Robert N. McCauley

Bank for International Settlements (BIS)

Patrick McGuire

Bank for International Settlements (BIS)

Date Written: April 1, 2012

Abstract

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

Avdjiev, Stefan and McCauley, Robert N. and McGuire, Patrick M., Rapid Credit Growth and International Credit: Challenges for Asia (April 1, 2012). BIS Working Paper No. 377. Available at SSRN: https://ssrn.com/abstract=2039311

Stefan Avdjiev (Contact Author)

Bank for International Settlements (BIS) ( email )

Centralbahnplatz 2
Basel, Basel-Stadt 4002
Switzerland

Robert N. McCauley

Bank for International Settlements (BIS) ( email )

CH-4002 Basel, Basel-Stadt
Switzerland

Patrick M. McGuire

Bank for International Settlements (BIS) ( email )

CH-4002 Basel, Basel-Stadt
Switzerland

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