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Credit Growth and Economic Recovery in Europe After the Global Financial Crisis

Author

Listed:
  • Sergei Antoshin
  • Mr. Marco Arena
  • Nikolay Gueorguiev
  • Mr. Tonny Lybek
  • Mr. John Ralyea
  • Mr. Etienne B Yehoue

Abstract

This paper reviews the empirical relationships between credit growth, economic recovery, and bank profitability in Europe after the global financial crisis (GFC). We find that the post-GFC recoveries in Europe have been weaker than previous recoveries, with the “double-dip” recessions in 2011–12 in many countries and the worldwide reach of the GFC explaining the underperformance. Bank lending has been subdued as well, but this appears to have only held back the recovery relatively moderately. A 10 percent increase in bank credit to the private sector is associated with a rise of 0.6–1 percent in real GDP and 2–2½ percent in real private investment. These relationships have not changed significantly during and after the GFC. Loan quality, customer deposits, bank equity price index, and bank capital appear to be closely linked to bank lending. As expected, bank profitability is positively and significantly influenced by credit growth, but this relationship has weakened after the GFC.

Suggested Citation

  • Sergei Antoshin & Mr. Marco Arena & Nikolay Gueorguiev & Mr. Tonny Lybek & Mr. John Ralyea & Mr. Etienne B Yehoue, 2017. "Credit Growth and Economic Recovery in Europe After the Global Financial Crisis," IMF Working Papers 2017/256, International Monetary Fund.
    • Handle: RePEc:imf:imfwpa:2017/256
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    Citations

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    Cited by:

    1. Christiana Afriyie Manu & Peter Arhenful & Mathew Owusu-Mensah, 2023. "Does Financial Development in Relation to Remittances influence Economic Growth in Sub-Saharan Africa?," Advances in Management and Applied Economics, SCIENPRESS Ltd, vol. 13(6), pages 1-17.
    2. Gabriel Zsurkis, 2022. "Determinants of cost of equity for listed euro area banks," Working Papers w202209, Banco de Portugal, Economics and Research Department.
    3. Almir ALIHODŽIĆ & İbrahim Halil EKŞİ, 2018. "Credit growth and non-performing loans: evidence from Turkey and some Balkan countries," Eastern Journal of European Studies, Centre for European Studies, Alexandru Ioan Cuza University, vol. 9, pages 229-249, December.
    4. Ramona Vasilica Bacter & Alina Emilia Maria Gherdan & Monica Angelica Dodu & Ramona Ciolac & Tiberiu Iancu & Luminița Pîrvulescu & Anca Monica Brata & Alexandra Ungureanu & Roxana Mihaela Bolohan (Coc, 2024. "The Influence of Legislative and Economic Conditions on Romanian Agritourism: SWOT Study of Northwestern and Northeastern Regions and Sustainable Development Strategies," Sustainability, MDPI, vol. 16(17), pages 1-36, August.
    5. Eglantina Hysa & Naqeeb Ur Rehman, 2023. "Economic Growth Through Financial Development: Empirical Evidences from New Member States and Western Balkan Countries," Springer Proceedings in Business and Economics, in: Luminita Chivu & Ignacio De Los Ríos Carmenado & Jean Vasile Andrei (ed.), Crisis after the Crisis: Economic Development in the New Normal, chapter 0, pages 49-67, Springer.
    6. Benbouzid, Nadia & Kumar, Abhishek & Mallick, Sushanta K. & Sousa, Ricardo M. & Stojanovic, Aleksandar, 2022. "Bank credit risk and macro-prudential policies: Role of counter-cyclical capital buffer," Journal of Financial Stability, Elsevier, vol. 63(C).
    7. E. C. Mamatzakis & C. Staikouras, 2020. "Testing for the effects of credit crunch on agriculture investment in the EU," Bulletin of Economic Research, Wiley Blackwell, vol. 72(4), pages 434-450, October.
    8. Andreas Greiner & Katharina Steiner & Walter Waschiczek, 2019. "The recent upswing in corporate loan growth in Austria – a first risk assessment," Financial Stability Report, Oesterreichische Nationalbank (Austrian Central Bank), issue 38, pages 56-73.
    9. Egan, Paul & McQuinn, Kieran, 2023. "Regime switching and the responsiveness of prices to supply: The case of the Irish housing market," The Quarterly Review of Economics and Finance, Elsevier, vol. 87(C), pages 82-94.
    10. Egan, Paul & McQuinn, Kieran, 2022. "Examining the response of house prices to supply using a Markov regime switching approach: The case of the Irish housing market," Papers WP732, Economic and Social Research Institute (ESRI).
    11. Feld, Lars P. & Schmidt, Christoph M. & Schnabel, Isabel & Truger, Achim & Wieland, Volker, 2019. "Den Strukturwandel meistern. Jahresgutachten 2019/20 [Dealing with Structural Change. Annual Report 2019/20]," Annual Economic Reports / Jahresgutachten, German Council of Economic Experts / Sachverständigenrat zur Begutachtung der gesamtwirtschaftlichen Entwicklung, volume 127, number 201920, February.

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