Measures to tame credit growth: Are they effective? |
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| Institution: | 1. Charles University in Prague, Institute of Economic Studies, Opletalova 26, CZ-11000 Prague, Czech Republic;2. Czech National Bank, Na Příkopě 28, CZ-11503 Prague, Czech Republic;3. Joint Vienna Institute, Mariahilfer Strasse 97, 1060 Vienna, Austria;1. Financial Stability Department of the Czech National Bank, Czech Republic;2. External Economic Relations Division of the Czech National Bank, Czech Republic;1. Department of Economics and Finance, Brunel University, Uxbridge UB8 3PH, United Kingdom;2. CERDI, University of Auvergne, France;3. Institute of Economic Studies, Charles University, Czech Republic;4. CESifo Munich, Germany;1. University of Hamburg, Germany;2. GIGA German Institute of Global and Area Studies, Institute of Asian Studies, Rothenbaumchaussee 32, 20148 Hamburg, Germany;3. Radboud University Nijmegen, Department of Economics, P.O. Box 9108, 6500 HK Nijmegen, The Netherlands;1. Ifo Institute for Economic Research, CESifo, Germany;2. IOS, Regensburg, Germany;3. Institute of Economic Studies, Charles University, Prague, Czech Republic;4. Czech National Bank, Czech Republic;1. Department of Economics, Southern Illinois University, Edwardsville, IL 62026-1102, USA;2. Department of Economics, University of Texas at San Antonio, San Antonio, TX 78249-0633, USA |
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| Abstract: | This paper focuses on policy measures taken to curb bank credit growth in the private sector in the pre-crisis period 2003–2007. Our analysis is based on an original survey conducted in 2010 on eleven central banks in Central and Eastern Europe (CEE). The findings reveal substantial policy intervention: a total of 82 measures were implemented in CEE during the period considered. The paper presents a panel data analysis of the effectiveness of the policy measures adopted in the region. The overall results indicate that certain measures – particularly asset classification and provisioning rules and loan eligibility criteria – might have been effective in taming bank credit growth, especially if applied in the context of more general policy measures featuring a combination of various instruments. However, in countries in which the authorities managed to somewhat decrease the flows of bank credit into the economy, the measures were often circumvented via direct, cross-border credit from foreign banks and credit provided by domestic, non-bank financial companies. |
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| Keywords: | Credit growth Monetary policy Macroprudential policy Central and Eastern Europe |
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