Public credit and Economic cycle yn Spain: 1971-2015

Public credit in Spain was organized around the Official Credit Institute (ICO) from 1971 onwards. The importance of the public credit as part of the total credit has been decreasing from 1971 until 2015. Considering that public credit is an economic policy instrument, the role it played during expansions and recessions may be of major significance to stabilize the economy. This paper analyzes the behavior of the credit in relation to the economic cycle during the last forty years through the application of the à la Bry and Boschan algorithm that allows to date the peaks and troughs during the cycle. This helps us observe whether the public credit has been procyclical or countercyclical with respect to the private credit cycle and the GDP cycle as well, thus offering a meaningful explanation linked to the ICO history. Besides, there is evidence of a certain degree of synchronization between the credit cycle -both public and private- and the economic cycle, with the private credit showing the largest synchronization, both in the economic upswing and downswing. The public credit behaviour, on the contrary, tends to be more countercyclical during the recessive part of the cycle, thus exerting a buffer function of the economic situation.