Domestic Credit Growth and International Capital Flows

46 Pages Posted: 12 Aug 2013

See all articles by Philip R. Lane

Philip R. Lane

Trinity College (Dublin) - Department of Economics; Centre for Economic Policy Research (CEPR); Central Bank of Ireland

Peter McQuade

European Central Bank (ECB)

Multiple version iconThere are 2 versions of this paper

Date Written: July 2013

Abstract

Europe experienced substantial cross-country variation in domestic credit growth and cross border capital flows during the pre-crisis period. We investigate the inter-relations between domestic credit growth and international capital flows over 1993-2008, with a special focus on the 2003-2008 boom period. We establish that domestic credit growth in European countries is strongly related to net debt inflows but not to net equity inflows. This pattern also holds for an extended sample of 54 advanced and emerging economies.

Keywords: Financial stability, financial globalisation, macro-prudential regulation

JEL Classification: E51, F32, G15

Suggested Citation

Lane, Philip R. and McQuade, Peter, Domestic Credit Growth and International Capital Flows (July 2013). ECB Working Paper No. 1566. Available at SSRN: https://ssrn.com/abstract=2284255

Philip R. Lane (Contact Author)

Trinity College (Dublin) - Department of Economics ( email )

Trinity College
Dublin 2
Ireland
+353 1 608 2259 (Phone)
+353 1 677 2503 (Fax)

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Central Bank of Ireland ( email )

P.O. Box 559
Dame Street
Dublin, 2
Ireland

Peter McQuade

European Central Bank (ECB) ( email )

Sonnemannstrasse 22
Frankfurt am Main, 60314
Germany

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