Lending standards and output growth

Divya Kirti

No 79, ESRB Working Paper Series from European Systemic Risk Board

Abstract: While some credit booms are followed by economic underperformance, many are not. Can lending standards help separate good credit booms from bad credit booms contemporaneously? To observe lending standards internationally, I use information from primary debt capital markets. I construct the high-yield (HY) share of bond issuance for a panel of 38 countries. The HY share is procyclical, suggesting that lending standards in bond markets are extrapolative. Credit booms with deteriorating lending standards (rising HY share) are followed by lower GDP growth in the subsequent three to four years. Such booms deserve attention from policy makers. JEL Classification: E32, E44, G12

Keywords: behavioral finance; credit cycles; lending standards; risky debt share (search for similar items in EconPapers)
Date: 2018-07
New Economics Papers: this item is included in nep-fdg and nep-mac
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Citations: View citations in EconPapers (8)

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Related works:
Journal Article: Lending standards and output growth (2025)
Working Paper: Lending Standards and Output Growth (2018)
Working Paper: Lending standards and output growth (2018)
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Persistent link: https://EconPapers.repec.org/RePEc:srk:srkwps:201879

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