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When are credit gap estimates reliable?

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  • Deryugina, Elena
  • Ponomarenko, Alexey
  • Rozhkova, Anna

Abstract

We evaluate the reliability of credit gap measures estimated over time samples of different lengths. We augment our empirical analysis (which turned out to be somewhat inconclusive) with Monte Carlo experiments. For this purpose we build an agent-based model that realistically reproduces credit cycles and use it to generate the artificial data set. We found that 12–15 years of available data is sufficient for the estimation of reliable credit gaps (i.e. the reliability of credit gap estimates will not improve substantially as more data are added to the sample).

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  • Deryugina, Elena & Ponomarenko, Alexey & Rozhkova, Anna, 2020. "When are credit gap estimates reliable?," Economic Analysis and Policy, Elsevier, vol. 67(C), pages 221-238.
    • Handle: RePEc:eee:ecanpo:v:67:y:2020:i:c:p:221-238
    DOI: 10.1016/j.eap.2020.07.009
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    Cited by:

    1. Tihana Škrinjarić, 2023. "Credit-to-GDP Gap Estimates in Real Time: A Stable Indicator for Macroprudential Policy Making in Croatia," Comparative Economic Studies, Palgrave Macmillan;Association for Comparative Economic Studies, vol. 65(3), pages 582-614, September.
    2. Karminsky, A. & Dyachkova, N., 2020. "Empirical study of the relationship between credit cycles and changes in credit ratings," Journal of the New Economic Association, New Economic Association, vol. 48(4), pages 138-160.

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    More about this item

    Keywords

    Credit gap; Credit cycle; Countercyclical capital buffer; Agent-based models;
    All these keywords.

    JEL classification:

    • C63 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computational Techniques
    • E37 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Forecasting and Simulation: Models and Applications
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • E51 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Money Supply; Credit; Money Multipliers

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