Credit Growth in Central and Eastern Europe: New (Over)Shooting Stars?

41 Pages Posted: 9 Nov 2006

See all articles by Balázs Égert

Balázs Égert

Organization for Economic Co-Operation and Development (OECD); CESifo (Center for Economic Studies and Ifo Institute); Université Paris X Nanterre - Department of Economics; William Davidson Institute

Peter Backe

Oesterreichische Nationalbank (OeNB)

Tina Zumer

European Central Bank (ECB)

Date Written: October 2006

Abstract

This paper analyzes 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 small open OECD economies (out-of-sample panel) 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 countriesare very close or even above the estimated equilibrium levels, whereas others are still well below the equilibrium level.

Keywords: credit to the private sector, credit growth, equilibrium level of credit, initial undershooting, transition economies

JEL Classification: C31, C33, E44, G21

Suggested Citation

Egert, Balazs and Backe, Peter and Zumer, Tina, Credit Growth in Central and Eastern Europe: New (Over)Shooting Stars? (October 2006). ECB Woking Paper No. 687, Available at SSRN: https://ssrn.com/abstract=936896

Balazs Egert (Contact Author)

Organization for Economic Co-Operation and Development (OECD) ( email )

2 rue Andre Pascal
Paris Cedex 16, 75775
France

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

Université Paris X Nanterre - Department of Economics

Nanterre Cedex, 92001
France

William Davidson Institute

724 E. University Ave.
Wyly Hall
Ann Arbor, MI 48109-1234
United States

Peter Backe

Oesterreichische Nationalbank (OeNB) ( email )

Otto-Wagner-Platz 3, PO Box 61
Vienna,
1010 Vienna, A-1011
Austria

Tina Zumer

European Central Bank (ECB) ( email )

Sonnemannstrasse 22
Frankfurt am Main, 60314
Germany

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