External debt composition and domestic credit cycles

Stefan Avdjiev, Stephan Binder and Ricardo Sousa

No 627, BIS Working Papers from Bank for International Settlements

Abstract: We assess the role of external debt in shaping the dynamics of domestic credit cycles. Using quarterly data for 40 countries between 1980 and 2015, we examine four dimensions of external debt composition: instrument, sector, currency and maturity. We show that the first two dimensions provide valuable information about the likelihood of credit booms and busts. In particular, we find that a higher share of external bank lending in the form of bonds is associated with a greater likelihood of credit booms. Our results also reveal that credit busts tend to be associated with a lower share of interbank lending and a higher share of lending from banks to nonbanks.

Keywords: credit cycles; external debt composition (search for similar items in EconPapers)
Pages: 46 pages
Date: 2017-04
New Economics Papers: this item is included in nep-ban and nep-mac
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Citations: View citations in EconPapers (12)

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Related works:
Journal Article: External debt composition and domestic credit cycles (2021)
Working Paper: External debt composition and domestic credit cycles (2018)
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Persistent link: https://EconPapers.repec.org/RePEc:bis:biswps:627

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