 Why are credit booms sometimes sweet and sometimes sour?Vitor Castro and Rodrigo Martins International Journal of Finance & Economics, 2021, vol. 26, issue 2, 3054-3074 Abstract: This paper investigates the commonalities and differences between benign credit booms and those that end up in banking crises by employing a Multinomial and a Sequential Logit model over a panel of industrial and developing countries. Some economic, political and institutional factors are found to play an important role in understanding the credit booms dynamics. In particular, this study shows that the quantity and price of credit, liquidity in the economy, economic growth, openness of the economy, government orientation, political stability and Central Bank independence are relevant to explain not only the occurrence of credit booms but also – and most importantly – whether they end up in a systemic banking crisis or not. While a better economic environment and Central Bank independence are essential for both industrial and developing countries to avoid credit booms from going badly, political factors seem to exert a stronger influence in developing countries. Date: 2021 Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:wly:ijfiec:v:26:y:2021:i:2:p:3054-3074 Ordering information: This journal article can be ordered from Access Statistics for this article International Journal of Finance & Economics is currently edited by Mark P. Taylor, Keith Cuthbertson and Michael P. Dooley More articles in International Journal of Finance & Economics from John Wiley & Sons, Ltd. |
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