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Determinants of Bank Credit in Emerging Market Economies

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  • Vahram Stepanyan
  • Kai Guo

Abstract

We examine changes in bank credit across a wide range of emerging market economies during the last decade. The rich time-series and cross-section information allows us to draw broader lessons compared to many existing researches, which focus on a specific set of emerging market economies or on shorter time periods. Our results show that domestic and foreign funding contribute positively and symmetrically to credit growth. The results also indicate that stronger economic growth leads to higher credit growth, and high inflation, while increasing nominal credit, is detrimental to real credit growth. We also find that loose monetary conditions, either domestic or global, result in more credit, and that the health of the banking sector also matters. Finally, we discuss some policy lessons.

Suggested Citation

  • Vahram Stepanyan & Kai Guo, 2011. "Determinants of Bank Credit in Emerging Market Economies," IMF Working Papers 2011/051, International Monetary Fund.
    • Handle: RePEc:imf:imfwpa:2011/051
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    References listed on IDEAS

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    1. Ari Aisen & Michael Franken, 2015. "Bank credit during the 2008 financial crisis: a cross-country comparison," Journal Economía Chilena (The Chilean Economy), Central Bank of Chile, vol. 18(1), pages 26-49, April.
    2. Kulwant Rai & Herman Kamil, 2010. "The Global Credit Crunch and Foreign Banks’ Lending to Emerging Markets: Why Did Latin America Fare Better?," IMF Working Papers 2010/102, International Monetary Fund.
    3. International Monetary Fund, 2010. "The Credit Boom in the EU New Member States: Bad Luck or Bad Policies?," IMF Working Papers 2010/130, International Monetary Fund.
    4. Mr. Ralph Chami & Mr. Raphael A Espinoza & Mr. Adolfo Barajas & Mr. Heiko Hesse, 2010. "Recent Credit Stagnation in the Mena Region: What to Expect? What Can Be Done?," IMF Working Papers 2010/219, International Monetary Fund.
    5. Patrick McGuire & Nikola Tarashev, 2008. "Bank health and lending to emerging markets," BIS Quarterly Review, Bank for International Settlements, December.
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    Keywords

    WP; credit growth; deposit rate;
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