Short-run dynamics in bank credit: Assessing nonlinearities in cyclicality

Vincent Bouvatier (), Antonia López-Villavicencio () and Valérie Mignon
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Vincent Bouvatier: EconomiX - EconomiX - UPN - Université Paris Nanterre - CNRS - Centre National de la Recherche Scientifique
Antonia López-Villavicencio: CEPN - Centre d'Economie de l'Université Paris Nord - UP13 - Université Paris 13 - USPC - Université Sorbonne Paris Cité - CNRS - Centre National de la Recherche Scientifique
Valérie Mignon: EconomiX - EconomiX - UPN - Université Paris Nanterre - CNRS - Centre National de la Recherche Scientifique, UPN - Université Paris Nanterre, CEPII - Centre d'études prospectives et d'informations internationales

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Abstract: This paper explores whether the procyclicality of private credit changes during the business cycle. To this end, we rely on the estimation of smooth transition regression models for a sample of 17 OECD countries over the 1986-2010 period. Our findings show that credit procyclicality is nonlinear, depending on economic conditions. More specifically, credit is highly procyclical in extreme-booms and busts-regimes in Canada, the UK and the US, while procyclicality is less pronounced in one or both extreme regimes in Australia, Belgium, France, Finland, the Netherlands, Norway, and Spain. Our results also emphasize the importance of financial factors in explaining the short-run behavior of private credit.

Keywords: business cycle; nonlinearity; smooth transition regression models; Credit cycle (search for similar items in EconPapers)
Date: 2013-10-19
Note: View the original document on HAL open archive server: https://hal.science/hal-05455774v1
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Published in Economic Modelling, 2013, 37, pp.127-136. ⟨10.1016/j.econmod.2013.10.027⟩

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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-05455774

DOI: 10.1016/j.econmod.2013.10.027

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