Private-sector credit in Central and Eastern Europe: new

This paper analyses the equilibrium level of private credit to GDP in 11 Central and Eastern European countries in order to see whether the high credit growth recently observed in some of these countries led to above equilibrium private credit-to-GDP levels. We use estimation results obtained for a...

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Bibliographic Details
Published inComparative economic studies Vol. 49; no. 2; pp. 201 - 231
Main Authors Egert, Balazs, Backe, Peter, Zumer, Tina
Format Journal Article
LanguageEnglish
Published Palgrave Macmillan Ltd. (Springer) 01.06.2007
Subjects
Banking industry
Economic aspects
Forecasts and trends
Gross domestic product
Private sector
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Summary:This paper analyses the equilibrium level of private credit to GDP in 11 Central and Eastern European countries in order to see whether the high credit growth recently observed in some of these countries led to above equilibrium private credit-to-GDP levels. We use estimation results obtained for a panel of smart open OECD economies (out-of-sample sample) to derive the equilibrium credit level for a panel of transition economies (in-sample panel). We opt for this (out-of-sample) approach because the coefficient estimates for transition economies are fairly unstable. We show that there is a large amount of uncertainty to determine the equilibrium level of private credit. Yet our results indicate that a number of countries are very close or even above the estimated equilibrium levels, whereas others are still well below the equilibrium level.
ISSN:0888-7233
1478-3320