Credit Expansion in Emerging Markets: Propeller of Growth?

25 Pages Posted: 27 Nov 2015

See all articles by Mercedes García-Escribano

Mercedes García-Escribano

International Monetary Fund (IMF)

Fei Han

International Monetary Fund (IMF)

Date Written: September 2015

Abstract

This paper explores the contribution of credit growth and the composition of credit portfolio (corporate, consumer, and housing credit) to economic growth in emerging market economies (EMs). Using cross-country panel regressions, we find significant impact of credit growth on real GDP growth, with the magnitude and transmission channel of the impact of credit on real activity depending on the specific type of credit. In particular, the results show that corporate credit shocks influence GDP growth mainly through investment, while consumer credit shocks are associated with private consumption. In addition, taking Brazil as a case study, we use a time series model to examine the role that the expansion and composition of credit played in driving real GDP growth in the past. The results of the case study are consistent with those found in the cross-country panel regressions.

Keywords: Credit Growth, credit, gdp, consumption, investment, real gdp, Financial Markets and the Macroeconomy, General,

JEL Classification: E44, E44, E50, E50, E51, E51

Suggested Citation

García-Escribano, Mercedes and Han, Fei, Credit Expansion in Emerging Markets: Propeller of Growth? (September 2015). IMF Working Paper No. 15/212, Available at SSRN: https://ssrn.com/abstract=2696091

Mercedes García-Escribano (Contact Author)

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
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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