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Real-time determination of credit cycle phases in emerging markets

Author

Listed:
  • Elena Deryugina

    (Bank of Russia, Russian Federation)

  • Alexey Ponomarenko

    (Bank of Russia, Russian Federation)

Abstract

We test the ability of early warning indicators that appear in the literature to predict credit cycle peaks in a cross-section of emerging markets. Our results confirm that the standard credit gap indicator performs satisfactorily. The robustness of real-time credit cycle determination may potentially (and with a risk of overfitting the data) be improved by simultane-ously monitoring GDP growth, banks’ non-core liabilities, the financial sector’s value added and (to a lesser extent) the change in the debt service ratio.

Suggested Citation

  • Elena Deryugina & Alexey Ponomarenko, 2017. "Real-time determination of credit cycle phases in emerging markets," Bank of Russia Working Paper Series wps17, Bank of Russia.
    • Handle: RePEc:bkr:wpaper:wps17
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    References listed on IDEAS

    as
    1. Stijn Claessens & M. Ayhan Kose & Marco E. Terrones, 2011. "Financial Cycles: What? How? When?," NBER International Seminar on Macroeconomics, University of Chicago Press, vol. 7(1), pages 303-344.
    2. Mr. Bas B. Bakker & Mr. Giovanni Dell'Ariccia & Mr. Luc Laeven & Mr. Jerome Vandenbussche & Ms. Deniz O Igan & Mr. Hui Tong, 2012. "Policies for Macrofinancial Stability: How to Deal with Credit Booms," IMF Staff Discussion Notes 2012/006, International Monetary Fund.
    3. Alessi, Lucia & Detken, Carsten, 2011. "Quasi real time early warning indicators for costly asset price boom/bust cycles: A role for global liquidity," European Journal of Political Economy, Elsevier, vol. 27(3), pages 520-533, September.
    4. Bas B. Bakker & Giovanni Dell'Ariccia & Luc Laeven & Jérôme Vandenbussche & Deniz O Igan & Hui Tong, 2012. "Policies for Macrofinancial Stability; How to Deal with Credit Booms," IMF Staff Discussion Notes 12/06, International Monetary Fund.
    5. Aastveit, Knut Are & Jore, Anne Sofie & Ravazzolo, Francesco, 2016. "Identification and real-time forecasting of Norwegian business cycles," International Journal of Forecasting, Elsevier, vol. 32(2), pages 283-292.
    6. Piotr Bańbuła & Marcin Pietrzak, 2017. "Early warning models of banking crises applicable to non-crisis countries," NBP Working Papers 257, Narodowy Bank Polski.
    7. Davis, E. Philip & Karim, Dilruba, 2008. "Comparing early warning systems for banking crises," Journal of Financial Stability, Elsevier, vol. 4(2), pages 89-120, June.
    8. Philip Lowe & Claudio Borio, 2002. "Asset prices, financial and monetary stability: exploring the nexus," BIS Working Papers 114, Bank for International Settlements.
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    Cited by:

    1. Deryugina, Elena & Ponomarenko, Alexey & Rozhkova, Anna, 2020. "When are credit gap estimates reliable?," Economic Analysis and Policy, Elsevier, vol. 67(C), pages 221-238.

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    More about this item

    Keywords

    credit cycle; countercyclical capital buffers; early warning indicators; emerging markets.;
    All these keywords.

    JEL classification:

    • 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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