 Credit growth, current account and financial depthMehmet Ekinci, Fatma Erdem and Zubeyir Kilinc () Applied Economics, 2015, vol. 47, issue 17, 1809-1821 Abstract: Exploring the determinants and dynamics of the current account balance is one of the priorities of academic literature and policy circles. Although the effects of structural variables are deeply analysed, a lesser attention has been paid to the impact of financial variables. Drawing on standard empirical current account models and with a large sample of industrial and developing countries, we report a significant deterioration in the current account balance in case of an increase in the credit growth. Moreover, we find that this link is substantially stronger for the developing ones motivating a closer examination. Therefore, we further advance our analysis and show that credit growth causes a stronger impact on the current account balance for lower levels of financial depth. In other words, at the early stages of financial development, acceleration in the credit growth might cause a larger deterioration in the current account balance; thus, it might be suggested that monetary policy and macro-prudential measures aimed at preventing financial excess might be more effective to reduce the external imbalances at the early stages of financial deepening. Date: 2015 Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:taf:applec:v:47:y:2015:i:17:p:1809-1821 Ordering information: This journal article can be ordered from DOI: 10.1080/00036846.2014.1002897 Access Statistics for this article Applied Economics is currently edited by Anita Phillips More articles in Applied Economics from Taylor & Francis Journals |
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