Credit Expansions and Financial Crises: The Roles of Household and Firm Credit

31 Pages Posted: 25 May 2006

See all articles by Berrak Buyukkarabacak

Berrak Buyukkarabacak

Ozyegin University

Neven T. Valev

Georgia State University - Department of Economics

Date Written: May 2006

Abstract

The literature has identified credit expansions to the private sector as an important predictor of financial crises in developing countries. We extend the literature by decomposing credit into credit extended to households and credit extended to firms. We compile a unique disaggregated data set and find evidence that household credit growth and firm credit growth have positive, distinct, and statistically significant effects on the likelihood of banking and currency crises. Furthermore, household credit growth is a particularly important predictor of banking crises in countries with a high propensity to consume.

Keywords: Financial Crisis, Household and Firm Credit Growth

JEL Classification: E44, F41, G21

Suggested Citation

Bahadir, Berrak and Valev, Neven T., Credit Expansions and Financial Crises: The Roles of Household and Firm Credit (May 2006). Andrew Young School of Policy Studies Research Paper No. 06-55, Available at SSRN: https://ssrn.com/abstract=903980 or http://dx.doi.org/10.2139/ssrn.903980

Berrak Bahadir

Ozyegin University ( email )

Kusbakisi Cd. No: 2
Altunizade Uskudar
Istanbul, 34662
Turkey

Neven T. Valev (Contact Author)

Georgia State University - Department of Economics ( email )

Andrew Young School of Policy Studies
University Plaza
Atlanta, GA 30303
United States
404-651-0418 (Phone)
404-651-4985 (Fax)

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