The Non-Bank Credit Cycle

Finance and Economics Discussion Series ◽

10.17016/feds.2018.076 ◽

2018 ◽

Vol 2018 (076) ◽

Cited By ~ 2

Author(s):

◽

Esti Kemp ◽

René van Stralen ◽

Alexandros P. Vardoulakis ◽

Peter Wierts ◽

...

Keyword(s):

Bank Credit ◽

Credit Cycle

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Financial Soundness Indicator, Financial Cycle, Credit Cycle and Business Cycle－Evidence from Taiwan

International Journal of Economics and Finance ◽

10.5539/ijef.v8n4p166 ◽

2016 ◽

Vol 8 (4) ◽

pp. 166 ◽

Cited By ~ 2

Author(s):

Yuan Chang

Keyword(s):

Business Cycle ◽

Economic Activity ◽

Financial Stability ◽

Financial Institution ◽

Balance Sheet ◽

Bank Credit ◽

Contraction Phase ◽

Financial Cycle ◽

Financial Soundness ◽

Credit Cycle

<p>Business cycle is the repeated expansions (from trough to peak) and contractions (from peak to trough) of real economic activity. Credit cycle is the cyclical process of the bank credit, ranging from short/long-term, loan to enterprise and loan to individual. Financial cycle reflects ups and downs in asset prices and financial institution's balance sheet. This paper examines the linkage among cycles as well as their lead-lag relationship. Theoretically, credit cycle is one of reasons driving business cycle, and financial cycle is a fundamental cause of credit cycle. Based on Taiwan’s quarterly data, this paper firstly identifies cyclical behavior of indicators of real economic activity, bank credit and assets prices in recent decade by defining expansion phases and contraction phases of cyclical variables. Second, this paper calculates concordance index to examine the degree of synchronization among cycles. Third, while the soundness for assets and liabilities of financial institution may drive financial cycle, this paper employs IMF’s Financial Soundness Indicator (FSI) as predictor of expansion and contraction phase of cyclical variables. Specifically, the paper assesses the health of bank’s balance sheet variables by Probit estimation on linkage between FSIs and expansion/contraction phase of cycle. Based on empirical evidence, the knowledge about the extent of assets/liability condition of financial institution corresponding to the expansion and contraction phase of financial, credit and business cycle is enhanced. Authority concerning about financial stability should oversight the performance of FSIs and then engage in prompt corrective actions when the level and volatility of those indicators sharply.</p>

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Financial Shocks and Credit Cycles

Russian Journal of Money and Finance ◽

10.31477/rjmf.202004.45 ◽

2020 ◽

Vol 79 (4) ◽

pp. 45-74

Author(s):

Mikhail Mamonov ◽

◽

Vera Pankova ◽

Renat Akhmetov ◽

Anna Pestova ◽

...

Keyword(s):

Economic Effect ◽

Bank Credit ◽

Financial Shocks ◽

Credit Supply ◽

Credit Cycles ◽

Supply Shock ◽

Credit Cycle ◽

Monetary Policy Shock ◽

The Relationship

This paper compares the contribution of internal and external financial shocks to the formation of credit cycle phases using cross- country quarterly data for 27 countries, including advanced and emerging economies, for the period from 1990 through 2019. To conduct comparative analysis, we apply IV Probit models of the credit cycle which take into account the relationship between the credit and business cycles the inertia of the cycles and the non-linearity of the transmission of internal and external financial shocks to the economy through the credit market. In our sample of countries, the transmission of shocks to credit cycle phases proves to be non-linear (a switching effect is observed depending on the time elapsed since the shocks occurred); with the economic effect of the external capital inflow shock being in absolute value twice stronger than that of the bank credit supply shock (on average for the current and subsequent quarters); in turn, the bank credit supply shock is twice stronger than the monetary policy shock. A counterfactual analysis of the role of financial shocks in the formation of the credit cycle in Russia indicates an increase in the effectiveness of the monetary authorities in terms of their ability to control the phases of the credit cycle and, accordingly, a relative decrease in the role of credit supply shocks, while the global financial cycle retains its dominance.

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