Assessing the Sustainability of Credit Growth: The case of Central and Eastern European Countries

Assessing the Sustainability of Credit Growth: The case of Central and Eastern European Countries

Blog Article

Credit growth rates as high as 30% or 50% a year were observed in some Central Eastern European countries (CEECs) in 2006-2007, such as the Baltic States, Bulgaria or Romania.This strong credit growth could have been due to the Small Tray catching-up process but could also have been excessive, paving the way to the credit crunch that followed the crisis in 2008-2009.We try to assess the excessiveness of credit by applying a number of methods.First, we consider the gap between current credit and its long-term trend and we find some signs of credit PEPPERMINT GUM booms, in several CEECs in 2005-2007.Second, we assess the "normal" growth of credit with regard to fundamentals through econometric estimations.

Credit growth is also shown to have been excessive in several countries just before the 2008-2009 financial crisis.