Credit-to-GDP ratios – non-linear trends and persistence: evidence from 44 OECD economies

Juan Cuestas, Luis Gil-Alana and María Malmierca

Journal of Economic Studies, 2022, vol. 50, issue 3, 448-463

Abstract: Purpose - In particular, in this article, the authors investigate the degree of persistence in the credit-to-gross domestic product (GDP) ratio in 44 Organisation for Economic Co-operation and Development (OECD) economies in the context of nonlinear deterministic trends. Design/methodology/approach - The authors use Chebyshev's polynomials in time, which allow us to model changes in the data in a smoother way than by structural breaks. Findings - This study’s results indicate that approximately one-quarter of the series display non-linear structures, and only Argentina displays a mean reverting pattern. Research limitations/implications - Policy implications of the results obtained are discussed at the end of the manuscript. Originality/value - The authors use an approach developed that allows for non-linear trends based on Chebyshev polynomials in time, with the residuals being fractionally integrated or integrated of orderd, wheredcan be any real value.

Keywords: Persistence; Fractional integration; Chebyshev polynomials; Private debt (search for similar items in EconPapers)
Date: 2022
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Working Paper: Credit-to-GDP ratios. Non-linear trends and persistence: Evidence from 44 OECD economies (2021)
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Persistent link: https://EconPapers.repec.org/RePEc:eme:jespps:jes-12-2021-0637

DOI: 10.1108/JES-12-2021-0637

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