Article ID Journal Published Year Pages File Type
5054534 Economic Modelling 2014 10 Pages PDF
Abstract
This paper explores whether the procyclicality of private credit changes during the business cycle. To this end, we rely on the estimation of smooth transition regression models for a sample of 17 OECD countries over the 1986-2010 period. Our findings show that credit procyclicality is nonlinear, depending on economic conditions. More specifically, credit is highly procyclical in extreme - booms and busts - regimes in Canada, the UK and the US, while procyclicality is less pronounced in one or both extreme regimes in Australia, Belgium, France, Finland, the Netherlands, Norway, and Spain. Our results also emphasize the importance of financial factors in explaining the short-run behavior of private credit.
Related Topics
Social Sciences and Humanities Economics, Econometrics and Finance Economics and Econometrics
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