Skewed Credit and Growth Dynamics after the Global Financial Crisis

51 Pages Posted: 22 Feb 2019

See all articles by Gemma Bolotaulo Estrada

Gemma Bolotaulo Estrada

Asian Development Bank - Economic Research

Aitor Erce

UPNA

Donghyun Park

Asian Development Bank - Economic Research

Juan Rojas

European Stability Mechanism

Date Written: October 16, 2018

Abstract

A large empirical literature finds that financial development is beneficial for economic growth, although some recent evidence suggests otherwise. We contribute to the finance–growth literature by examining the role of credit growth skewness and long-run growth. Earlier literature found that credit growth skewness is negatively associated with economic growth. We revisit this relationship using a large and recent panel dataset that encompasses Organisation for Economic Co-operation and Development economies and the impact of the global financial crisis. While our results reconfirm an association between credit skewness and growth, the relationship is more nuanced than previously thought. We find that the beneficial effects from lower skewness—systemic financial risks—were evident only prior to 2000. Our findings help explain why boom–bust dynamics were positively associated with economic growth in emerging markets in the past and why the growth of advanced economies has been sluggish since the global financial crisis.

Keywords: credit dynamics, economic growth, skewness

JEL Classification: F34, F36, F43, O41

Suggested Citation

Estrada, Gemma Bolotaulo and Erce, Aitor and Park, Donghyun and Rojas, Juan, Skewed Credit and Growth Dynamics after the Global Financial Crisis (October 16, 2018). Asian Development Bank Economics Working Paper Series No. 562 (October, 2018), Available at SSRN: https://ssrn.com/abstract=3339149 or http://dx.doi.org/10.2139/ssrn.3339149

Gemma Bolotaulo Estrada

Asian Development Bank - Economic Research ( email )

6 ADB Avenue, Mandaluyong City 1550
Metro Manila
Philippines

Aitor Erce

UPNA ( email )

Pamplona
Spain

Donghyun Park (Contact Author)

Asian Development Bank - Economic Research ( email )

6 ADB Avenue, Mandaluyong City 1550
Metro Manila
Philippines

Juan Rojas

European Stability Mechanism ( email )

6a Circuit de la Foire Internationale
L-1347
Luxembourg

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