Credit-to-GDP Gaps in Real Time: Correcting Indicators for More Reliability in Policy Decision-Making

Tihana Škrinjarić

Chapter 12 in Banking Resilience and Global Financial Stability, 2024, pp 317-346 from World Scientific Publishing Co. Pte. Ltd.

Abstract: Countercyclical capital buffer (CCyB) is an essential instrument of macroprudential policy. Over the last couple of years, many studies have dealt with finding adequate indicators of credit activity monitored for CCyB calibration purposes. The credit-to-GDP gap is widely used and recognized as the leading indicator of credit dynamics for CCyB decision-making. Research and applications in practice regarding the stability of the credit-to-GDP gap are still lacking today. This stability refers to the end-point problems within the statistical filtering part of the analysis and problems with the GDP volatility, especially during crises, such as COVID-19. This chapter focuses on several practical approaches to correcting the credit-to-GDP gap as the primary indicator of credit dynamics in real time. Moreover, the chapter deals with possible corrections of the credit-to-GDP gap. The solutions allow for lower volatility of indicators over time so that the decision-maker can use stable signals.

Keywords: Bank capital; Capital Buffers; Financial Stability; Macroprudential Regulation; Systemic Risks; Accounting Standards; Bank Stability; Financial Reporting; Local GAAP; IAS/IFRS; Lending Risk; Bank Capitalization; Bank Risk-Taking; Credit Risk; Asian Banks; Stability; Financial Development; Banking System; Growth; Regression; Human Resources; Trade: Population; Emerging Economies; Human Capital; Financial Stability; Intellectual Capital Efficiency; Human Capital Efficiency; Structural Capital Efficiency; Relational Capital Efficiency; Resources Based Theory; System Generalize Method of Moments; Competitive Environment; Islamic Banks; Asian Countries; Banking; Regulatory Capital; Bank Performance; Basel Accord; Profitability; Risk; Minimal Capital Requirements; Political Instability; Bank Supervision; 2SLS; Financial Institutions; Bank Holding Companies; Great Recession: FDIC; Financial Markets; Financial Crises; Economic Recessions; Heterogeneity; Systemic Risk; Dodd Frank; Foreign Exchange; Systemic Risk; Turkish Banking Sector; Volatility; Foreign Loans; Domestic Loans; Total Assets; Total Credits; Total Deposits; Interest Rates; Financial Crisis; Risk Management; Competency Development; Banks; Integrated; Resilience; Uncertainty; Pandemic; Risk; Actionable; Financial Stability; Systemic Risk; Crisis Management; Bank Recovery and Resolution; Capital Requirements; Climate Physical Risk; Climate Transition Risk; Digital Finance; Safety Net; Twin Transition; Market Illiquidity; Monetary Policy; Bank Lending Channel; Banks; Shocks; Loan Supply; OECD Countries; Financial Crisis; Interest Rates; Transmission Mechanism; European Monetary Union; European Central Bank; ECB Governing Council; Expansionary Monetary Policy; Trilemma; TARGET2-Balance; Inflation; Transmission Protection Instrument (TPI); ECB Anti-Fragmentation Instrument; Pandemic Emergency Purchase Program (PEPP); Credit-to-GDP Gap; Out-of-Sample Forecasts; Augmented Credit Gap; Countercyclical Capital Buffer; Credit Gap; Decision-making Process; Basel Gap; Forecasting Gaps; One-Sided Gap Series; Two-Sided Gap Series; Altman; Z-Score; Economic Distress; Kazakhstan; Banks; Emerging Market; Multiple Discriminant Analysis; Financial Health; Prediction Accuracy; Wilks' Approach; Direct Approach; Microfinance; Microfinance Institutions; Global Financial Crisis; Covid-19; Social Outreach; Financial Sustainability; Operational Self-Sufficiency; NGOs; Capital Structure; Legal Status; Liquidity Hoarding; Economic Policy Uncertainty; Qatari Banks; Islamic Banks; Endogeneity; Instrumental Variable Approach; Economic Blockade; Asset-Side Liquidity Hoarding; Liability-Side Liquidity Hoarding; Gulf Cooperation Council (search for similar items in EconPapers)
JEL-codes: G2 G21 G24 G28 (search for similar items in EconPapers)
Date: 2024
References: Add references at CitEc
Citations:

Downloads: (external link)
https://www.worldscientific.com/doi/pdf/10.1142/9781800614321_0012 (application/pdf)
https://www.worldscientific.com/doi/abs/10.1142/9781800614321_0012 (text/html)
Ebook Access is available upon purchase.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:wsi:wschap:9781800614321_0012

Ordering information: This item can be ordered from

Access Statistics for this chapter

More chapters in World Scientific Book Chapters from World Scientific Publishing Co. Pte. Ltd.
Bibliographic data for series maintained by Tai Tone Lim ().