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Why are credit booms sometimes sweet and sometimes sour?

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journal contribution
posted on 2020-06-23, 10:18 authored by Vitor CastroVitor Castro, Rodrigo Martins
This paper investigates the commonalities and differences between benign credit booms and those that end up in banking crises by employing a Multinomial and a Sequential Logit model over a panel of industrial and developing countries. Some economic, political and institutional factors are found to play an important role in understanding the credit booms dynamics. In particular, this study shows that the quantity and price of credit, liquidity in the economy, economic growth, openness of the economy, government orientation, political stability and Central Bank independence are relevant to explain not only the occurrence of credit booms but also – and most importantly – whether they end up in a systemic banking crisis or not. While a better economic environment and Central Bank independence are essential for both industrial and developing countries to avoid credit booms from going badly, political factors seem to exert a stronger influence in developing countries.

History

School

  • Business and Economics

Department

  • Economics

Published in

International Journal of Finance and Economics

Publisher

Wiley

Version

  • AM (Accepted Manuscript)

Rights holder

© John Wiley & Sons, Ltd

Publisher statement

This is the peer reviewed version of the following article: CASTRO, V. and MARTINS, R., 2020. Why are credit booms sometimes sweet and sometimes sour? International Journal of Finance and Economics, doi:10.1002/ijfe.1950, which has been published in final form at https://doi.org/10.1002/ijfe.1950. This article may be used for non-commercial purposes in accordance with Wiley Terms and Conditions for Use of Self-Archived Versions.

Acceptance date

2020-06-18

Publication date

2020-08-10

Copyright date

2020

ISSN

1076-9307

eISSN

1099-1158

Language

  • en

Depositor

Dr Vitor Castro. Deposit date: 22 June 2020

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