Credit Reversals

Francisco Vazquez

No 2021/103, IMF Working Papers from International Monetary Fund

Abstract: This paper studies episodes in which aggregate bank credit contracts alongside expanding economic activity—credit reversals. Using data for 179 countries during 1960‒2017, the paper finds that reversals are a relatively common phenomenon--on average, they occur every five years. By comparison, banking crises take place every eight years on average. Credit reversals and banking crises also appear related to each other: reversals become more likely in the aftermath of banking crises, while the likelihood of crises drops following reversals. In terms of foregone economic activity, reversals are shown to be very costly, at about two-thirds of the costs of banking crises after taking into account their relative frequencies.

Keywords: credit reversal; banking crisis; bank credit contract; credit growth; credit growth distribution; x industrial; credit demand; credit supply and demand; cycle characteristic; banking crises database; Credit; Banking crises; Bank credit; Credit cycles; Global (search for similar items in EconPapers)
Pages: 34
Date: 2021-04-23
New Economics Papers: this item is included in nep-his and nep-mac
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Working Paper: Credit Reversals (2020)
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