Credit Booms and Busts in the Caribbean

Winston Moore, Denny Lewis-Bynoe and Stacia Howard

MPRA Paper from University Library of Munich, Germany

Abstract: Since 1970, private sector credit has grown quite rapidly in the Caribbean. More recently, between 2004 and 2006, total real credit in the Caribbean has risen by a cumulative 55.7 percent, or approximately 19 percent per annum. In some countries, the rate of expansion has even been stronger, which is of concern given the likely negative macroeconomic consequences of credit booms. This paper attempts to identify the factors that have led to credit booms and conversely busts in the Caribbean, employing annual data for 13 Caribbean countries covering the period 1970 to 2006 in the analysis. This study employs a panel count data regression approach. Three key groups of variables are considered: (1) macroeconomic developments; (2) macroeconomic policy, and (3) external shocks. The reported results suggest that macroeconomic developments were the main determinants of credit booms in the Caribbean, with low inflation, high growth in GDP per capita, investment booms as well as less developed financial systems leading to the emergence of credit booms and conversely for busts.

Keywords: Credit Booms; Credit Busts; Caribbean; Count Data Model (search for similar items in EconPapers)
JEL-codes: E32 E51 (search for similar items in EconPapers)
Date: 2010-02-02
New Economics Papers: this item is included in nep-mac
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Citations: View citations in EconPapers (1)

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