Credit, banking fragility, and economic performance

Jerome Creel, Paul Hubert and Fabien Labondance

Oxford Economic Papers, 2023, vol. 75, issue 2, 553-573

Abstract: This article explores the role of banking fragility for the relationship between private credit and economic growth and bridges two literatures, one on the link between credit and economic growth and the other on the effects of banking fragility on credit dynamics. We consider two types of banking fragility on both the asset and liability sides: nonperforming loans and the ratio of bank capital to assets. Using a standard growth model framework and a dynamic generalized method of moment panel estimator on data for European Union countries, we find that banking fragility has a negative effect on economic growth. A consequence of considering banking fragility is that credit appears to have a positive effect on economic growth only when banking fragility is relatively low.

JEL-codes: G10 G21 O40 (search for similar items in EconPapers)
Date: 2023
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Related works:
Working Paper: Credit, banking fragility, and economic performance (2023)
Working Paper: Credit, banking fragility, and economic performance (2023)
Working Paper: Credit, banking fragility and economic performance (2020)
Working Paper: Credit, banking fragility and economic performance (2020)
Working Paper: Credit, banking fragility and economic performance (2020)
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