An Anatomy of Credit Booms in Pakistan: Evidence from Macro Aggregates and Firm Level Data

Muhammad Ejaz and Muhammad Hanif

No 101, SBP Working Paper Series from State Bank of Pakistan, Research Department

Abstract: We identify private credit booms in Pakistan, using fully modified HP filter, and analyze the behavior of selected macroeconomic aggregates around these booms based on annual data over the period 1960-2018. We observe that credit booms are associated with economic expansions, increasing asset prices, appreciating REER and widening of current account deficit in Pakistan. Micro data analysis shows an association between credit booms and measures of corporate leverage, valuations and profitability. Our analysis of bank level data shows similar cyclical patterns in lending activity and profitability in banking system. Lastly, we find that credit booms in Pakistan are associated with sudden stops and currency crises but not with banking crisis. These results are in line with existing evidence on credit cycles’ dynamics in emerging markets.

Keywords: Credit Booms; Business Cycles; Macroprudential Supervision (search for similar items in EconPapers)
JEL-codes: E32 E51 G28 (search for similar items in EconPapers)
Pages: 35 pages
Date: 2018-12
New Economics Papers: this item is included in nep-bec, nep-fdg and nep-mac
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:sbp:wpaper:101

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