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Interesting paper put out by NBER:
An Anatomy Of Credit Booms: Evidence From Macro Aggregates And Micro Data http://papers.nber.org/papers/w14049
Too technical in many ways for me so I'd appreciate any feedback about some of the conclusions, but I'll list some important points made to frame the discussion. Keep in mind, data was collected from 1960-2006, so our current catastrophe was not factored in and would seem to be at odds with conclusions drawn about industrialized nations...
"A credit boom is defined as an episode in which credit to the private sector grows by more than during a typical business cycle expansion."
"At the peak of booms, the average expansion in real credit per capita reached almost 30% above trend in emerging economies, twice what is observed in industrial nations."
"Our thresholds are defined as multiples of the country-specific standard deviaton of credit over the business cycle, which changes the threshold level of credit needed to define a boom..with each country's cyclical variability of credit. This ensures that a credit boom is a situation in which the deviation from trend in credit is 'unusually large'."
"EMs and ICs show booms with similar duration of about 6-7 years and upswings that last longer than downswings."
"Industrial countries show negligible changes in inflation, and rising (falling) equity and housing prices in the build up (declining) phase of credit booms. In emerging economies, inflation tends to spike after the credit booms peak..." Sounds a lot like us.
"Credit booms in emerging economies are often associated with currency crises, banking crises, and Sudden Stops....credit booms in industrial countries are only occasionally associated with banking and currency crises....moreover, industrial countries in a credit boom are more likely to experience currency crises than banking crises." We have both.
"Not all credit booms end in crisis, but many of the recent emerging market crises were associated with credit booms...the frequency of credit booms in emerging markets is higher when preceded by periods of large capital inflows but not when preceded by domestic financial reforms or gains in total factor productivity while industrial countries show the opposite pattern."
This had free access yesterday, but might need to be paid for today.
An Anatomy Of Credit Booms: Evidence From Macro Aggregates And Micro Data http://papers.nber.org/papers/w14049
Too technical in many ways for me so I'd appreciate any feedback about some of the conclusions, but I'll list some important points made to frame the discussion. Keep in mind, data was collected from 1960-2006, so our current catastrophe was not factored in and would seem to be at odds with conclusions drawn about industrialized nations...
"A credit boom is defined as an episode in which credit to the private sector grows by more than during a typical business cycle expansion."
"At the peak of booms, the average expansion in real credit per capita reached almost 30% above trend in emerging economies, twice what is observed in industrial nations."
"Our thresholds are defined as multiples of the country-specific standard deviaton of credit over the business cycle, which changes the threshold level of credit needed to define a boom..with each country's cyclical variability of credit. This ensures that a credit boom is a situation in which the deviation from trend in credit is 'unusually large'."
"EMs and ICs show booms with similar duration of about 6-7 years and upswings that last longer than downswings."
"Industrial countries show negligible changes in inflation, and rising (falling) equity and housing prices in the build up (declining) phase of credit booms. In emerging economies, inflation tends to spike after the credit booms peak..." Sounds a lot like us.
"Credit booms in emerging economies are often associated with currency crises, banking crises, and Sudden Stops....credit booms in industrial countries are only occasionally associated with banking and currency crises....moreover, industrial countries in a credit boom are more likely to experience currency crises than banking crises." We have both.
"Not all credit booms end in crisis, but many of the recent emerging market crises were associated with credit booms...the frequency of credit booms in emerging markets is higher when preceded by periods of large capital inflows but not when preceded by domestic financial reforms or gains in total factor productivity while industrial countries show the opposite pattern."
This had free access yesterday, but might need to be paid for today.