Bank Credit and the 2008 Financial Crisis: A cross-country Comparison

Ari Aisen and Michael Franken

Working Papers Central Bank of Chile from Central Bank of Chile

Abstract: The purpose of this paper is to empirically study the macroeconomic, structural and banking determinants of bank credit growth in the wake of the 2008 financial crisis. Using standard cross-section econometric techniques on a sample covering over 80 countries, analyzed in the period from January 2002 to May 2009, this paper finds that larger bank credit booms in the 24 months before the crisis and lower GDP growth of main trading partners after are among the most relevant determinants of the post-crisis bank credit slowdown. Structural variables such as financial depth and integration were also important determinants of bank credit growth after the crisis. Finally, countercyclical monetary policy and liquidity played a critical role in alleviating bank credit contraction after the 2008 financial crisis, suggesting that countries should pursue appropriate institutional and macroeconomic frameworks conducive to countercyclical monetary policies.

Date: 2009-12
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Persistent link: https://EconPapers.repec.org/RePEc:chb:bcchwp:532

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