High Frequency Monitoring of Credit Creation: A New Tool for Central Banks in Emerging Market Economies

Carlos Giraldo (), Iader Giraldo, Jose Gomez-Gonzalez and Jorge Uribe

No 21077, Documentos de trabajo from FLAR

Abstract: This study utilizes weekly datasets on loan growth in Colombia to develop a daily indicator of credit expansion using a two-step machine learning approach. Initially, employing Random Forests (RF), missing data in the raw credit indicator is filled using high frequency indicators like spreads, interest rates, and stock market returns. Subsequently, Quantile Random Forest identifies periods of excessive credit creation, particularly focusing on growth quantiles above 95%, indicative of potential financial instability. Unlike previous studies, this research combines machine learning with mixed frequency analysis to create a versatile early warning instrument for identifying instances of excessive credit growth in emerging market economies. This methodology, with its ability to handle nonlinear relationships and accommodate diverse scenarios, offers significant value to central bankers and macroprudential authorities in safeguarding financial stability.

Keywords: Credit growth; Machine learning methodology; Excessive credit creation; Financial stability (search for similar items in EconPapers)
JEL-codes: C45 E44 G21 (search for similar items in EconPapers)
Pages: 15 pages
Date: 2024-03-10
New Economics Papers: this item is included in nep-ban, nep-big, nep-cba, nep-cmp, nep-fdg, nep-ifn and nep-mon
Note: Link to the paper: https://flar.com/wp-content/uploads/2024/03/Paper-High-Frequency-Monitoring-of-Credit-Creation-A-New-Tool-for-Central-Banks-in-Emerging-Market-Economies.pdf
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://flar.com/wp-content/uploads/2024/03/Paper- ... Market-Economies.pdf Full text (application/pdf)

Related works:
Journal Article: High frequency monitoring of credit creation: A new tool for central banks in emerging market economies (2024)
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:col:000566:021077

Access Statistics for this paper

More papers in Documentos de trabajo from FLAR
Bibliographic data for series maintained by Fondo Latino Americano de Reservas ().