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Author: Mr.Marco Terrones
Publisher: International Monetary Fund
ISBN: 1451870841
Category : Business & Economics
Languages : en
Pages : 52
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Book Description
We study the characteristics of credit booms in emerging and industrial economies. Macro data show a systematic relationship between credit booms and economic expansions, rising asset prices, real appreciations and widening external deficits. Micro data show a strong association between credit booms and leverage ratios, firm values, and banking fragility. We also find that credit booms are larger in emerging economies, particularly in the nontradables sector; most emerging markets crises are associated with credit booms; and credit booms in emerging economies are often preceded by large capital inflows but not by financial reforms or productivity gains.
Author: Mr.Marco Terrones
Publisher: International Monetary Fund
ISBN: 1451870841
Category : Business & Economics
Languages : en
Pages : 52
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Book Description
We study the characteristics of credit booms in emerging and industrial economies. Macro data show a systematic relationship between credit booms and economic expansions, rising asset prices, real appreciations and widening external deficits. Micro data show a strong association between credit booms and leverage ratios, firm values, and banking fragility. We also find that credit booms are larger in emerging economies, particularly in the nontradables sector; most emerging markets crises are associated with credit booms; and credit booms in emerging economies are often preceded by large capital inflows but not by financial reforms or productivity gains.
Author: Mr.Bas B. Bakker
Publisher: International Monetary Fund
ISBN: 1475572689
Category : Business & Economics
Languages : en
Pages : 46
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Book Description
This note explores the costs and benefits of different policy options to reduce the risks associated with credit booms, drawing upon several country experiences and the findings from econometric analysis.
Author: Mr.Marco Arena
Publisher: International Monetary Fund
ISBN: 1498355269
Category : Business & Economics
Languages : en
Pages : 47
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Book Description
Using a comprehensive database on bank credit, covering 135 developing countries over the period 1960–2011, we identify, document, and compare the macro-economic dynamics of credit booms across low- and middle-income countries. The results suggest that while the duration and magnitude of credit booms is similar across country groups, macro-economic dynamics differ somewhat in low-income countries. We further find that surges in capital inflows are associated with credit booms. Moreover, credit booms associated with banking crises exhibit distinct macroeconomic dynamics, while also reflecting a potentially large deviation of credit from country fundamentals. These results suggest that low-income countries should remain mindful of the inter-linkages between financial liberalization, increased cross-border banking activities, and rapid credit growth.
Author: Mr.Marco Arena
Publisher: International Monetary Fund
ISBN: 1484356861
Category : Business & Economics
Languages : en
Pages : 47
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Book Description
Using a comprehensive database on bank credit, covering 135 developing countries over the period 1960–2011, we identify, document, and compare the macro-economic dynamics of credit booms across low- and middle-income countries. The results suggest that while the duration and magnitude of credit booms is similar across country groups, macro-economic dynamics differ somewhat in low-income countries. We further find that surges in capital inflows are associated with credit booms. Moreover, credit booms associated with banking crises exhibit distinct macroeconomic dynamics, while also reflecting a potentially large deviation of credit from country fundamentals. These results suggest that low-income countries should remain mindful of the inter-linkages between financial liberalization, increased cross-border banking activities, and rapid credit growth.
Author: Mr.Stijn Claessens
Publisher: International Monetary Fund
ISBN: 1475561008
Category : Business & Economics
Languages : en
Pages : 66
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Book Description
This paper reviews the literature on financial crises focusing on three specific aspects. First, what are the main factors explaining financial crises? Since many theories on the sources of financial crises highlight the importance of sharp fluctuations in asset and credit markets, the paper briefly reviews theoretical and empirical studies on developments in these markets around financial crises. Second, what are the major types of financial crises? The paper focuses on the main theoretical and empirical explanations of four types of financial crises—currency crises, sudden stops, debt crises, and banking crises—and presents a survey of the literature that attempts to identify these episodes. Third, what are the real and financial sector implications of crises? The paper briefly reviews the short- and medium-run implications of crises for the real economy and financial sector. It concludes with a summary of the main lessons from the literature and future research directions.
Author: Aaron Tornell
Publisher: MIT Press
ISBN:
Category : Business & Economics
Languages : en
Pages : 206
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Book Description
Analysis and evidence of how the factors that give rise to boom-bust cycles in fast-growing developing economies also enhance long-run growth. The volatility that has hit many middle-income countries (MICs) after liberalizing their financial markets has prompted critics to call for new policies to stabilize these boom-bust cycles. But, as Aaron Tornell and Frank Westermann point out in this book, over the last two decades most of the developing countries that have experienced lending booms and busts have also exhibited the fastest growth among MICs. Countries with more stable credit growth, by contrast, have exhibited, on average, lower growth rates. Factors that contribute to financial fragility thus appear, paradoxically, to be a source of long-run growth as well. Tornell and Westermann analyze boom-bust cycles in the developing world and discuss how these cycles are generated by credit market imperfections. They explain why the financial liberalization that allows countries to overcome imperfections impeding rapid growth also generates the financial fragility that leads to greater volatility and occasional crises. The conceptual framework they present illustrates this linkage and allows Tornell and Westermann to address normative questions regarding liberalization policies.The authors also characterize key macroeconomic regularities observed across MICs, showing that credit markets play a key role not only in boom-bust episodes but in the strong "credit channel" observed during tranquil times. A theoretical framework is then presented that explains how credit market imperfections can account for these empirical patterns. Finally, Tornell and Westermann provide microeconomic evidence on the credit market imperfections that drive the results of the theoretical framework, finding that asymmetries between tradables and nontradables are key to understanding the patterns in MIC data.
Author: Mr.Ayhan Kose
Publisher: International Monetary Fund
ISBN: 1451871325
Category : Business & Economics
Languages : en
Pages : 77
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Book Description
We provide a comprehensive empirical characterization of the linkages between key macroeconomic and financial variables around business and financial cycles for 21 OECD countries over the period 1960–2007. In particular, we analyze the implications of 122 recessions, 112 (28) credit contraction (crunch) episodes, 114 (28) episodes of house price declines (busts), 234 (58) episodes of equity price declines (busts) and their various overlaps in these countries over the sample period. Our results indicate that interactions between macroeconomic and financial variables can play major roles in determining the severity and duration of recessions. Specifically, we find evidence that recessions associated with credit crunches and house price busts tend to be deeper and longer than other recessions. JEL Classification Numbers: E32; E44; E51; F42
Author: Thomas Sowell
Publisher: Basic Books (AZ)
ISBN: 0465018807
Category : Business & Economics
Languages : en
Pages : 194
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Book Description
Explains how we got into the current economic disaster that developed out of the economics and politics of the housing boom and bust. The "creative" financing of home mortgages and "creative" marketing of financial securities based on these mortgages to countries around the world, are part of the story of how a financial house of cards was built up--and then collapsed.
Author: Mr.Stijn Claessens
Publisher: International Monetary Fund
ISBN: 1484355261
Category : Business & Economics
Languages : en
Pages : 754
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Book Description
The lingering effects of the economic crisis are still visible—this shows a clear need to improve our understanding of financial crises. This book surveys a wide range of crises, including banking, balance of payments, and sovereign debt crises. It begins with an overview of the various types of crises and introduces a comprehensive database of crises. Broad lessons on crisis prevention and management, as well as the short-term economic effects of crises, recessions, and recoveries, are discussed.
Author: Mr.Eugenio Cerutti
Publisher: International Monetary Fund
ISBN: 1513552074
Category : Business & Economics
Languages : en
Pages : 35
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Book Description
The recent global crisis highlighted the risks stemming from real estate booms. This has generated a growing literature trying to better understand the sources and the risks associated with housing and credit booms. This paper complements and supplements the previous work by (i) exploiting more disaggregated data on credit allowing us to dissociate between firm-credit and household (and in some cases mortgage) credit, and (ii) by taking into account the characteristics of the mortgage market, including institutional as well as other factors that vary across countries. This detailed cross-country analysis offers new valuable insights.
