Bank Credit During the 2008 Financial Crisis: A Cross-Country Comparison, Issues 2010-2047
This paper empirically estimates the main determinants of bank credit growth during the 2008 financial crisis. Using a sample covering over 80 countries, this paper finds that larger bank credit booms prior to the crisis and lower GDP growth of trading partners are among the most important determinants of the post-crisis bank credit slowdown. Structural variables such as financial depth and integration were also relevant. Finally, countercyclical monetary policy and liquidity played a critical role in alleviating bank credit contraction after the 2008 financial crisis, suggesting that countries should pursue appropriate institutional and macroeconomic frameworks conducive to countercyclical monetary policies.
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Growth of Real Bank Credit to Domestic Private Sector Per Country
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2008 financial crisis 24 months bank credit growth Bank return banking system Basis points change in money coefficient is expected column concentration 2007 counter-cyclical monetary policy country’s credit boom prior credit contraction credit crunch credit growth post credit growth post-Lehman credit growth prior credit growth September Credit over GDP dependence on wholesale dependent variable determinant of credit determinants of bank Deviation from trend Dominican Republic dummy variable Emerging Asia Emerging Europe errors in parenthesis estimated exchange rate regime growth post-Lehman Brothers growth September 2006–August Kazakhstan Latin America Lehman Brothers Lehman Brothers bankruptcy macroeconomic marginal effect market rate September money market rate Monthly growth rates negative coefficient OECD Percentage change percentage point policy rates post-Lehman Brothers bankruptcy public capital support rate September 2008–May rates of bank real bank credit Real credit growth Real GDP growth receiving public capital regions regression return on equity September 2008 statistically significant Table