What Drives Credit Growth in Emerging Asia?

Author/Editor:

Fei Han ; Selim Elekdag

Publication Date:

February 1, 2012

Electronic Access:

Free Download. Use the free Adobe Acrobat Reader to view this PDF file

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary:

This paper seeks to uncover the main drivers of credit growth in emerging Asia using a multi-country structural vector autoregressive (SVAR) model. Taking a novel approach, we developed a two-block SVAR whereby shocks within blocks are identified using sign restrictions, whereas shocks across the blocks are identified using a recursive (block-) Cholesky structure. We find that domestic factors are more dominant than external factors in driving rapid credit growth in emerging Asia. This is particularly true for domestic monetary policy, which can play a pivotal role in terms of managing rapid credit growth in emerging Asia.

Series:

Working Paper No. 12/43

Subject:

Credit booms Credit expansion Cross country analysis Economic models Emerging markets Flexible exchange rates Monetary policy Shock identification

English

Publication Date:

February 1, 2012

ISBN/ISSN:

9781463936440/1018-5941

Stock No:

WPIEA2012043

Format:

Paper

Pages:

43

Please address any questions about this title to publications@imf.org