Sectoral Credit Cycles and Systemic Risk in the United States

21 Pages Posted: 28 Feb 2019

See all articles by Stijn Ferrari

Stijn Ferrari

National Bank of Belgium

Pablo Rovira Kaltwasser

Catholic University of Leuven (KUL); National Bank of Belgium

Date Written: February 4, 2019


This paper studies the properties and systemic risk implications of sectoral credit cycles for the United States over the period 1960Q1 – 2017Q3. The analysis shows that the credit cycle in the United States was indeed characterised by systemically relevant sector-specific boom/bust cycles during our sample period. Sectoral credit exuberance, with the exception of consumer credit, generally does not lead to broader credit exuberance within a period of one year. Taken together, these findings indicate that it may be useful to act upon sectoral credit cycles rather than on broad-based credit developments. Regarding the systemic relevance of sector-specific boom/bust cycles, the results indicate that CRE is the most systemic credit segment: exuberance in the sector-specific component of the CRE credit-to-GDP gap tends to be followed by a surge in financial stress and borrower delinquencies. Exuberance in the residential mortgage sector may also lead to financial stress and tends to be followed by a moderate rise in borrower delinquency rates. For sufficiently large shocks to C&I credit, there has been an increase in the aggregate credit risk at commercial banks in the United States, albeit not as strong as following sector-specific shocks to RRE and CRE mortgages. Finally, losses following a period of exuberance in sectoral credit developments are not necessarily limited to the exuberant credit segments. In particular, exuberance in CRE and RRE mortgage credit tends to raise delinquency rates in credit segments beyond real estate.

Keywords: counter cyclical capital buffer, financial cycle

JEL Classification: G10, G18

Suggested Citation

Ferrari, Stijn and Rovira Kaltwasser, Pablo and Rovira Kaltwasser, Pablo, Sectoral Credit Cycles and Systemic Risk in the United States (February 4, 2019). Available at SSRN: or

Stijn Ferrari (Contact Author)

National Bank of Belgium ( email )

Brussels, B-1000

Pablo Rovira Kaltwasser

National Bank of Belgium ( email )

Brussels, B-1000

Catholic University of Leuven (KUL) ( email )

Naamsestraat 69
Leuven, 3000

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