Skip to main content
SpringerLink
Log in

Private-Sector Credit in Central and Eastern Europe: New (Over) Shooting Stars?

  • Chapter
Global Banking Crises and Emerging Markets

Abstract

The emerging literature on credit growth in transition economies has documented that lending to the private sector has recently grown dynamically in a number of transition economies.2 This can be attributed to a number of factors, including macroeconomic stabilization, comprehensive reforms and privatization in the financial sector, the introduction of market institutions and legal reforms. However, given the size of the recent boom in bank lending in Central and Eastern Europe (CEE) some commentators have questioned whether the growth rates recorded in these countries can be viewed as sustainable in the medium to long run.

The paper benefited from discussion at seminars held at the Oesterreichische Nationalbank, the Banco de Espana and at DG ECFIN (European Commission). We are especially indebted to Ronald Albers, Kalin Hristov, Dubravko Mihaljek, Max Watson and four anonymous referees for stimulating and useful comments. We are also indebted to Caralee McLiesh for sharing with us the dataset used in the paper ‘Private credit in 129 countries’ (NBER Working Paper No. 11078), to Ivanna Vladkova-Hollar for providing us with the financial liberalization indicator, to Gergő Kiss for sharing data on housing prices in Hungary, and to Rafal Kierzenkowski, Luboš Komárek, Mindaugas Leika and Peeter Luikmel for help in obtaining housing prices for France, the Czech Republic, Lithuania and Estonia, respectively. We also thank Steven Fries and Tatiana Lysenko for the EBRD transition indicators going back to the early 1990s and Rena Mühldorf for language advice. The opinions expressed in this paper do not necessarily represent the views of the European Central Bank, the Oesterreichische Nationalbank or the European System of Central Banks (ESCB).

This is a preview of subscription content, log in via an institution to check access.

Access this chapter

Log in via an institution
eBook
USD 16.99
Price excludes VAT (USA)
  • Available as EPUB and PDF
  • Read on any device
  • Instant download
  • Own it forever
Hardcover Book
USD 109.99
Price excludes VAT (USA)
  • Durable hardcover edition
  • Dispatched in 3 to 5 business days
  • Free shipping worldwide - see info

Tax calculation will be finalised at checkout

Purchases are for personal use only

Institutional subscriptions

Preview

Unable to display preview. Download preview PDF.

Unable to display preview. Download preview PDF.

References

  • Abiad, A and Mody, A. 2005: Financial reform: What shakes it? What shapes it? American Economic Review 95(1): 66–88.

    Article  Google Scholar 

  • Arpa, M, Reininger, T and Walko, Z. 2005: Can Banking Intermediation in the Central and Eastern European Countries ever Catch up with the Euro Area? In: Focus on European Economic Integration 2/05. Oesterreichische Nationalbank: Vienna.

    Google Scholar 

  • Backé, P and Zumer, T. 2005: Developments in Credit to the Private Sector in Central and Eastern European EU Member States: Emerging from Financial Repression — A Comparative Overview. In: Focus on European Economic Integration 2/05. Oesterreichische Nationalbank: Vienna.

    Google Scholar 

  • Beck, T, Levine, R and Loayza, N. 2000: Finance and the source of growth. Journal of Finance and Economics 58: 261–300.

    Article  Google Scholar 

  • Boissay, F, Calvo-Gonzalez, O and Kozluk, T. 2006: Is Lending in Central and Eastern Europe Developing too Fast? Paper presented at the conference ‘Finance and Consumption Workshop: Consumption and Credit in Countries with Developing Credit Markets’, Florence, 16–17 June 2006.

    Google Scholar 

  • Breitung, J. 2000: The Local Power of Some Unit Root Tests for Panel Data. In: Baltagi B (ed). Advances in Econometrics Vol. 15, Nonstationary Panels, Panel Cointegration, and Dynamic Panels. JAI Press: Amsterdam pp. 161–178.

    Google Scholar 

  • Brzoza-Brzezina, M. 2005: Lending booms in Europe’s periphery: South-Western lessons for Central-Eastern members ECB Working Paper 543.

    Google Scholar 

  • Calvo, G and Vegh, C. 1999: Inflation stabilization and BOP crisis in Developing Countries. Handbook of Macroeconomics. North Holland Elsevier: Amsterdam pp. 1531–1614.

    Book  Google Scholar 

  • Calza, A, Gartner, C and Sousa, J. 2001: Modelling the demand for loans to the private sector in the euro area. ECB Working Paper 55.

    Google Scholar 

  • Calza, A, Manrique, M and Sousa, J. 2003: Aggregate loans to the euro area private sector. ECB Working Paper 202.

    Google Scholar 

  • Coricelli, F, Mucci, F and Revoltella, D. 2006: Household Credit in the New Europe: Lending Boom or Sustainable Growth? CEPR Discussion Papers No. 5520.

    Google Scholar 

  • Cottarelli, C, DellAriccia, G and 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 29: 83–104.

    Article  Google Scholar 

  • Djankov, S, McLiesh, C and Schleifer, A. 2005: Private credit in 129 countries. NBER Working Paper 11078.

    Google Scholar 

  • Duenwald, C, Gueorguiev, N and Schaechter, A. 2005: Too much of a good thing? Credit booms in transition economies: The cases of Bulgaria, Romania, and Ukraine. IMF Working Paper 128.

    Google Scholar 

  • Égert, B, Halpern, L and MacDonald, R. 2006: Equilibrium Exchange Rates in Transition Economies: Taking Stock of the Issues. Journal of Economic Survey 20(2): 257–324.

    Article  Google Scholar 

  • European Bank for Reconstruction and Development. 2005: Transition Report. London.

    Google Scholar 

  • European Central Bank, Task Force Enlargement. 2006: Macroeconomic and financial stability challenges for accession and candidate countries Occasional Paper 48.

    Google Scholar 

  • European Central Bank. 2005a: Banking structures in the new EU Member States. January. Frankfurt/Main.

    Google Scholar 

  • European Central Bank. 2005b: EU Banking Sector Stability. October.

    Google Scholar 

  • Favara, G. 2003: An empirical reassessment of the relationship between finance and growth. IMF Working Paper No. 123.

    Google Scholar 

  • Gourinchas, P, Valdes, R and Landerretche, O. 2001: Lending booms: Latin America and the world. NBER Working Paper No. 8249.

    Google Scholar 

  • Hadri, K. 2000: Testing for Stationarity in Heterogeneous Panel Data. Econometric Journal 3: 148–161.

    Article  Google Scholar 

  • Hall, S. 2001: Credit Channel Effects in the Monetary Transmission Mechanism. Bank of England Quarterly Bulletin Q4: 442–448.

    Google Scholar 

  • Hilbers, P, Otker-Robe, I and Pazarbas y’oglu, C. 2006: Going too Fast? Managing Rapid Credit Growth in Central and Eastern Europe. IMF, Finance and Development 43(1): 42–45.

    Google Scholar 

  • Hofmann, B. 2001: The determinants of private sector credit in industrialised countries: Do property prices matter? BIS Working Paper 108.

    Google Scholar 

  • Hurlin, C and Kierzenkowski, R. 2003: Credit Markt Disequilibrium in Poland: Can We Find What We Expect? Non-Stationarity and the ‘Min’ Condition, William Davidson Working Paper No. 581.

    Google Scholar 

  • Im, KS, Pesaran, MH and Shin, Y. 2003: Testing for Unit Roots in Heterogeneous Panels. Journal of Econometrics. 115: 53–74.

    Article  Google Scholar 

  • International Monetary Fund. (2005a): Global Financial Stability Report. Washington, DC, April.

    Google Scholar 

  • International Monetary Fund. (2005b): Global Financial Stability Report. Washington, DC, September.

    Google Scholar 

  • International Monetary Fund. (2006): Global Financial Stability Report. Washington, DC, April.

    Google Scholar 

  • Kierzenkowski, R. 2004: Le canal étroit du crédit et la transmission de la politique monétaire: Analyse théorique et application au cas de la Pologne, PhD dissertation, University of Paris — Dauphine.

    Google Scholar 

  • Kierzenkowski, R. 2005: The Multi-Regime Bank Lending Channel and the Effectiveness of the Polish Monetary Transmission During Transition. Journal of Comparative Economics 33(1): 1–24.

    Article  Google Scholar 

  • Kiss, G and Vadas, G. 2005: The role of the housing market in monetary transmission. National Bank of Hungary Background Study 3.

    Google Scholar 

  • Kiss, G, Nagy, M and Vonnak, B. 2006: Credit Growth in Central and Eastern Europe: Trend, Cycle or Boom? Paper presented at the conference ‘Finance and Consumption Workshop: Consumption and Credit in Countries with Developing Credit Markets’, Florence, 16–17 June.

    Google Scholar 

  • Levin, A, Lin, CF and Chu, C. 2002: Unit Root Tests in Panel Data: Asymptotic and Finite-Sample Properties. Journal of Econometrics 108: 1–24.

    Article  Google Scholar 

  • Maeso-Fernandez, F, Osbat, C and Schnatz, B. 2005: Pitfalls in estimating equilibrium exchange rates for transition economies. Economic Systems 29(2): 130–143.

    Article  Google Scholar 

  • Pazarbaşyoğlu, C, Johnsen, G, Ötker, I and Hilbers, PLC. 2005: Assessing and Managing Rapid Credit Growth and the Role of Supervisory and Prudential Policies IMF Working Paper No. 05/151.

    Google Scholar 

  • Pesaran, MH, Shin, Yand Smith, R. 1999: Pooled mean group estimation of dynamic heterogeneous panels. Journal of the American Statistical Association 94: 621–634.

    Article  Google Scholar 

  • Rajan, RG. 1994: Why bank credit policies fluctuate: A theory and some evidence. Quarterly Journal of Economics 109(2): 399–441.

    Article  Google Scholar 

  • Rajan, RG and Zingales, L. 2001: Financial systems, industrial structure and growth. Oxford Review of Economic Policy 17(4): 461–482.

    Article  Google Scholar 

  • Schadler, S (ed) 2005: Euro Adoption in Central and Eastern Europe: Opportunities and Challenges. International Monetary Fund.

    Google Scholar 

  • Terrones, M and Mendoza, E. 2004: Are credit booms in emerging markets a concern? IMF, World Economic Outlook Chapter IV: 147–166.

    Google Scholar 

Download references

Author information

Authors and Affiliations

  1. Oesterreichische Nationalbank, Austria

    Balázs Égert

  2. William Davidson Institute, EconomiX at University of Paris X-Nanterre, France

    Balázs Égert

  3. Oesterreichische Nationalbank, France

    Peter Backé

  4. European Central Bank, France

    Tina Zumer

Authors
  1. Balázs Égert
    View author publications

    You can also search for this author in PubMed Google Scholar

  2. Peter Backé
    View author publications

    You can also search for this author in PubMed Google Scholar

  3. Tina Zumer
    View author publications

    You can also search for this author in PubMed Google Scholar

Editor information

Editors and Affiliations

  1. Arizona State University, USA

    Josef C. Brada (Professor of Economics) (Professor of Economics)

  2. Leonard N. Stern School of Business, New York University, USA

    Paul Wachtel (Professor of Economics) (Professor of Economics)

Copyright information

© 2016 Balázs Égert, Peter Backé and Tina Zumer

About this chapter

Cite this chapter

Égert, B., Backé, P., Zumer, T. (2016). Private-Sector Credit in Central and Eastern Europe: New (Over) Shooting Stars?. In: Brada, J.C., Wachtel, P. (eds) Global Banking Crises and Emerging Markets. Palgrave Macmillan, London. https://doi.org/10.1007/978-1-137-56905-9_6

Download citation

Publish with us

Policies and ethics

Search

Navigation