Barrell, R., Karim, D. and Macchiarelli, Corrado (2020) Towards an understanding of credit cycles: do all credit booms cause crises? European Journal of Finance, 26 (10). pp. 978-993. ISSN 1351-847X
Full text not available from this repository.Abstract
Macroprudential policy is now based around a countercyclical buffer, relating capital requirements for banks to the degree of excess credit in the economy. We consider the construction of the credit to GDP gap looking at different ways of extracting the cyclical indicator for excess credit. We compare different smoothing mechanisms for the credit gap, and demonstrate that some countries require an AR(2) smoother whilst other do not. We embed these different estimates of the credit gap in Logit models of financial crises, and show that the AR(2) cycle is a much better contributor to their explanation than is the HP filter suggested by the BIS and currently in use in policy making. We show that our results are robust to changes in assumptions, and we make criticisms of current policy settings.
Item Type: | Article |
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Additional Information: | © 2018 Informa UK Limited, trading as Taylor & Francis Group. |
Divisions: | European Institute |
Date Deposited: | 02 Aug 2022 16:39 |
Last Modified: | 18 Apr 2024 01:15 |
URI: | http://eprints.lse.ac.uk/id/eprint/115765 |
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