OPTIMAL CREDIT GROWTH
Abstract
Banking credit has an important role in financing the national economy and as engine of economic growth. The high growth of credit is a commonly normal phenomenon as a positive consequence from the increase of financial deepening in economy. On the other hand, one must consider the implication of credit growth towards the financial stabilization and macro condition. Therefore, the policy authority should be able to identify the credit growth that is considered to be risky for the financial system and the macro stability. This research measures the credit growth without negative impact towards the economy and the banking condition. The testing uses Markov Switching (MS) Univariate approach and MS Vector Error Correction Model. The result with MS Univariate approach shows that the upper limit of the real credit growth in moderate regime is about 17.39 percent, while using the MS VECM approach is about 22.15 percent.
Keywords: bank, credit, risk, markov switching error correction model
JEL classification: G21, E51, C23,C24Downloads
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References
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Bry, Gerhard dan Boschan, Charlotte (1971).”Cyclical Analysis of Time Series: Selected Procedures and Computer Programs”. Technical Paper No. 20, National Bureau of Economic Research, New York.
Beck, T.,R. Levina and N. Loayza, 2000, “Finance and The Source of Growth”, Journal of Finance and Economics, 58, p. 261-300.
Burns, Arthur dan Mitchell, Wesley (1946).”Measuring Business Cycles”. National Bureau of Economic Research.
Boissay F., Calvo-Gonzales., Kozluk T. (2005), “Is Lending in Central and Eastern Europe Developing Too Fast ?”, European Central Bank.
Cotarelly C., Dell’ Ariccia G., Vladkova-Hollar I. (2005), “Early Birds, Late Risers and Sleeping Beauties : Bank Credit Growth to The Private Sector in Central and Eastern Europe and in the Balkans”, Journal of Banking and Finance, 2009.
Den Heuvel, S. J. V. (2001). “The Bank Capital Channel of Monetary Policy, Mimeo. University of Penssylvania .
Eller, Markus., Frommer, Michael., Srzentic, Nora.,(2010) ,”Private Sector Credit in CESEE: Long-Run Relationships and Short-Run Dynamics”’ Austrian Central Bank.
Frait, Jan., Gersl, Adam., Seidler, Jacub. “Credit Growth and Financial Stability in the Czech Republic”, Policy Research Working Paper 5771, World Bank.
Furlong, Frederick T. (1992), “Capital Regulation and Bank Lending” Economic Review Federal Reserve Bank of San Fransisco
Dell’Ariccia, Giovanni et all (2012), “Policies for Macrofinancial Stability : How to Deal with Credit Booms”, IMF Staff Discussion Note No. SDN/12/06.Policies
Gambacorta, Leonardo. & Mistrully, Paolo E. , (2003),” Bank Capital and Lending Behaviour : Empirical Evidence for Italy”. Bank of Italy
Gambacorta, Leondardo & Ibanez, David M. (2011), ”The Bank Lending Channel : Lessons from The Crisis.” BIS Working Paper No. 345.
Goldstein, M, (2001),”Global Financial Stability : Recent Achievements and Ongoing Challenges,” Global Public Policies and Programs : Implications for Financing and Evaluation, Proceedings from a World Bank Workshop (Washington), pp. 157-61
Gourinchas p.O., Valdes R., Landerretche O. (2001). ”Lending Booms : Latin America and the World”, Working Paper 8249. National Bureau of Economic Research.
Iossifov, Plamen & Khamis, May, 2009, “Credit Growth in Sub Saharan Africans : Sources, Risks and Policy Responses”, IMF Working Paper WP/09/180.
International Monetary Fund (2004), “Are Credit Booms in Emerging Markets a Concern?” World Economic Outlook, April.
Jimenez,Gabriel., Steven, Ongena., José-Luis Peydró., and Saurina, Jesus., 2011,”Macroprudential Policy, Countercyclical Bank Capital Buffers and Credit Supply: Evidence from the Spanish Dynamic Provisioning Experiments,” Working Paper Bank of Spain
Kraft, Evan, and Tomislav Galac, 2011, “Macroprudential Regulation of Credit Booms and Busts: the Case of Croatia,” Policy Research Working Paper No. 5772 (Washington, DC: World Bank)
Krolzig, H.-M. (1997), “Markov Switching Vector Autoregressions: Modelling, Statistical Inference and Application to Business Cycle Analysis: Lecture Notes in Economics and Mathematical Systems”, 454, Springer-Verlag, Berlin.
Krolzig, H.-M.(1998), “Econometric Modeling of Markov-Switching Vector Autoregressions Using MSVAR for Ox”, Discussion Paper, Department of Economics, University of Oxford.
Lim, C , Columba, A et all (2011), ”Macroprudential Policy : What Instruments and How to Use Them?” IMF Working Paper No.WP/11/238.
Guonan, Ma., Xiandong, Yan., dan Xi, Liu (2011).” China’s Evolving Reserve Requirement”, BIS Working Paper No. 360
Martin, Antoine., Mc Andrews, James, & Skeie, David., “A Note on Bank Lending in Times of Large Bank Reserves”, Federal Reserve Bank of New York Staff Reports, May 2011.
Mendoza, Enrique G., & Terrones, Marco E. “An Anatomy of Credit Booms : Evidence from Macro Aggregates and Micro Data”, NBER Working Paper 14049
Niemira, Michael P. Dan Klein, Philip A. (1994).”Forecasting Financial and Economic Cycles”, John Wiley & Sons, Inc, USA.Oxford.
Psaradakis, Z.,M. Sola and F. Spagnolo, 2004. “On Markov Error Correction Models, with an Application to Stock Prices and Dividends”, Journal of Applied Econometrics 19(1). 69-88.
Rajan, R.G. and Zingales L. 2001.”Financial Systems, Industrial Structure and Growth”. Toward operationalizing macroprudential policy ;When to Act , Oxford Review of Economic Policy. 17(4) p. 461-482
Reinhart, Carmen M., and Kenneth S. Rogoff, 2009, “The Aftermath of Financial Crises,”NBER Working Paper No. 14656.
Tabak, Benyamin M., Noronha, Ana C. & Cajueiro, Daniel, 2011 "Bank Capital buffer, Lending Growth and Economic cyle : Empirical Evidence for Brazil”, Central Bank of Brazil.
Tovar, Camilo., Garcia-Escribano, Mercedes., dan Martin, Mercedes V. (2012), “Credit Growth and the Effectiveness of ReserveRequirements and Other MacroprudentialInstruments in Latin America”, IMF Working Paper No. WP/12/142.
Published
2012-12-27
How to Cite
Utari, G., Arimurti, T., & Kurnia, I. (2012). OPTIMAL CREDIT GROWTH. Buletin Ekonomi Moneter Dan Perbankan, 15(2), 3-34. https://doi.org/10.21098/bemp.v15i2.419
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Buletin Ekonomi Moneter dan Perbankan / Bulletin of Monetary Economics and Banking is licensed under a Creative Commons Attribution-NonCommercial 4.0 International License.
