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Credit-to-GDP ratios – non-linear trends and persistence: evidence from 44 OECD economies

Author

Listed:
  • Juan Carlos Cuestas
  • Luis A. Gil-Alana
  • María Malmierca

Abstract

Purpose - In particular, in this article, the authors investigate the degree of persistence in the credit-to-gross domestic product (GDP) ratio in 44 Organisation for Economic Co-operation and Development (OECD) economies in the context of nonlinear deterministic trends. Design/methodology/approach - The authors use Chebyshev's polynomials in time, which allow us to model changes in the data in a smoother way than by structural breaks. Findings - This study’s results indicate that approximately one-quarter of the series display non-linear structures, and only Argentina displays a mean reverting pattern. Research limitations/implications - Policy implications of the results obtained are discussed at the end of the manuscript. Originality/value - The authors use an approach developed that allows for non-linear trends based on Chebyshev polynomials in time, with the residuals being fractionally integrated or integrated of orderd, wheredcan be any real value.

Suggested Citation

  • Juan Carlos Cuestas & Luis A. Gil-Alana & María Malmierca, 2022. "Credit-to-GDP ratios – non-linear trends and persistence: evidence from 44 OECD economies," Journal of Economic Studies, Emerald Group Publishing Limited, vol. 50(3), pages 448-463, March.
    • Handle: RePEc:eme:jespps:jes-12-2021-0637
    DOI: 10.1108/JES-12-2021-0637
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    More about this item

    Keywords

    Persistence; Fractional integration; Chebyshev polynomials; Private debt;
    All these keywords.

    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • G30 - Financial Economics - - Corporate Finance and Governance - - - General
    • G51 - Financial Economics - - Household Finance - - - Household Savings, Borrowing, Debt, and Wealth

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