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Bank Credit and the 2008 Financial Crisis: A cross-country Comparison

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  • Ari Aisen
  • Michael Franken

Abstract

The purpose of this paper is to empirically study the macroeconomic, structural and banking determinants of bank credit growth in the wake of the 2008 financial crisis. Using standard cross-section econometric techniques on a sample covering over 80 countries, analyzed in the period from January 2002 to May 2009, this paper finds that larger bank credit booms in the 24 months before the crisis and lower GDP growth of main trading partners after are among the most relevant determinants of the post-crisis bank credit slowdown. Structural variables such as financial depth and integration were also important determinants of bank credit growth after the crisis. Finally, countercyclical monetary policy and liquidity played a critical role in alleviating bank credit contraction after the 2008 financial crisis, suggesting that countries should pursue appropriate institutional and macroeconomic frameworks conducive to countercyclical monetary policies.

Suggested Citation

  • Ari Aisen & Michael Franken, 2009. "Bank Credit and the 2008 Financial Crisis: A cross-country Comparison," Working Papers Central Bank of Chile 532, Central Bank of Chile.
    • Handle: RePEc:chb:bcchwp:532
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    File URL: https://www.bcentral.cl/documents/33528/133326/DTBC_532.pdf
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    References listed on IDEAS

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    Cited by:

    1. Baxa, Jaromír & Horváth, Roman & Vašíček, Bořek, 2013. "Time-varying monetary-policy rules and financial stress: Does financial instability matter for monetary policy?," Journal of Financial Stability, Elsevier, vol. 9(1), pages 117-138.
    2. Liliana Rojas-Suarez and Carlos Montoro, 2012. "Credit at Times of Stress: Latin American Lessons from the Global Financial Crisis - Working Paper 289," Working Papers 289, Center for Global Development.
    3. Cihak, Martin & Demirguc-Kunt, Asli & Feyen, Erik & Levine, Ross, 2012. "Benchmarking financial systems around the world," Policy Research Working Paper Series 6175, The World Bank.
    4. Carlos Montoro & Liliana Rojas-Suarez, 2012. "Credit at times of stress: Latin American lessons from the global financial crisis," BIS Working Papers 370, Bank for International Settlements.

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