Short-run dynamics in bank credit: Assessing nonlinearities in cyclicality

Vincent Bouvatier, Antonia López-Villavicencio and Valérie Mignon ()
Authors registered in the RePEc Author Service: Antonia López Villavicencio

Economic Modelling, 2014, vol. 37, issue C, 127-136

Abstract: This paper explores whether the procyclicality of private credit changes during the business cycle. To this end, we rely on the estimation of smooth transition regression models for a sample of 17 OECD countries over the 1986–2010 period. Our findings show that credit procyclicality is nonlinear, depending on economic conditions. More specifically, credit is highly procyclical in extreme – booms and busts – regimes in Canada, the UK and the US, while procyclicality is less pronounced in one or both extreme regimes in Australia, Belgium, France, Finland, the Netherlands, Norway, and Spain. Our results also emphasize the importance of financial factors in explaining the short-run behavior of private credit.

Keywords: Credit cycle; Business cycle; Nonlinearity; Smooth transition regression models (search for similar items in EconPapers)
JEL-codes: C33 E32 E51 G21 (search for similar items in EconPapers)
Date: 2014
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

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Working Paper: Short-run dynamics in bank credit: Assessing nonlinearities in cyclicality (2014)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecmode:v:37:y:2014:i:c:p:127-136

DOI: 10.1016/j.econmod.2013.10.027

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