 The effect of episodes of large capital inflows on domestic creditDavide Furceri, Stephanie Guichard and Elena Rusticelli The North American Journal of Economics and Finance, 2012, vol. 23, issue 3, 325-344 Abstract: This paper analyses the effect of capital inflow surges on the evolution of domestic credit. Using a panel of developed and emerging economies from 1970 to 2007, it is shown that in the two years following the beginning of a capital inflow surge the credit-to-GDP ratio increases by about 2 percentage points. The effect is reversed in the medium-term with the credit-to-GDP ratio decreased by almost 4 percentage points seven years after the initial surge. The paper also finds that the effect is different depending on the type of flows characterising the episode (debt vs. portfolio equity vs. FDI), with large capital inflows that are debt-driven having the largest effect. The results of the paper also suggest that the short-term effect of capital inflow surges on domestic credit depends on countries’ macroeconomic policy stances. In particular, it is found that this effect is lower in countries with higher real exchange rate flexibility and fiscal policy counter-cyclicality. Keywords: Capital inflows; Domestic credit; Credit booms (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:ecofin:v:23:y:2012:i:3:p:325-344 DOI: 10.1016/j.najef.2012.03.005 Access Statistics for this article The North American Journal of Economics and Finance is currently edited by Hamid Beladi More articles in The North American Journal of Economics and Finance from Elsevier |
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