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

  • Balázs Égert
  • Peter Backé
  • Tina Zumer


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.


Housing Price Euro Area Transition Economy Bank Credit Financial Liberalization 
These keywords were added by machine and not by the authors. This process is experimental and the keywords may be updated as the learning algorithm improves.


Unable to display preview. Download preview PDF.

Unable to display preview. Download preview PDF.


  1. Abiad, A and Mody, A. 2005: Financial reform: What shakes it? What shapes it? American Economic Review 95(1): 66–88.CrossRefGoogle Scholar
  2. 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
  3. 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
  4. Beck, T, Levine, R and Loayza, N. 2000: Finance and the source of growth. Journal of Finance and Economics 58: 261–300.CrossRefGoogle Scholar
  5. 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
  6. 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
  7. Brzoza-Brzezina, M. 2005: Lending booms in Europe’s periphery: South-Western lessons for Central-Eastern members ECB Working Paper 543.Google Scholar
  8. Calvo, G and Vegh, C. 1999: Inflation stabilization and BOP crisis in Developing Countries. Handbook of Macroeconomics. North Holland Elsevier: Amsterdam pp. 1531–1614.CrossRefGoogle Scholar
  9. 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
  10. Calza, A, Manrique, M and Sousa, J. 2003: Aggregate loans to the euro area private sector. ECB Working Paper 202.Google Scholar
  11. 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
  12. 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.CrossRefGoogle Scholar
  13. Djankov, S, McLiesh, C and Schleifer, A. 2005: Private credit in 129 countries. NBER Working Paper 11078.Google Scholar
  14. 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
  15. 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.CrossRefGoogle Scholar
  16. European Bank for Reconstruction and Development. 2005: Transition Report. London.Google Scholar
  17. European Central Bank, Task Force Enlargement. 2006: Macroeconomic and financial stability challenges for accession and candidate countries Occasional Paper 48.Google Scholar
  18. European Central Bank. 2005a: Banking structures in the new EU Member States. January. Frankfurt/Main.Google Scholar
  19. European Central Bank. 2005b: EU Banking Sector Stability. October.Google Scholar
  20. Favara, G. 2003: An empirical reassessment of the relationship between finance and growth. IMF Working Paper No. 123.Google Scholar
  21. Gourinchas, P, Valdes, R and Landerretche, O. 2001: Lending booms: Latin America and the world. NBER Working Paper No. 8249.Google Scholar
  22. Hadri, K. 2000: Testing for Stationarity in Heterogeneous Panel Data. Econometric Journal 3: 148–161.CrossRefGoogle Scholar
  23. Hall, S. 2001: Credit Channel Effects in the Monetary Transmission Mechanism. Bank of England Quarterly Bulletin Q4: 442–448.Google Scholar
  24. 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
  25. Hofmann, B. 2001: The determinants of private sector credit in industrialised countries: Do property prices matter? BIS Working Paper 108.Google Scholar
  26. 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
  27. Im, KS, Pesaran, MH and Shin, Y. 2003: Testing for Unit Roots in Heterogeneous Panels. Journal of Econometrics. 115: 53–74.CrossRefGoogle Scholar
  28. International Monetary Fund. (2005a): Global Financial Stability Report. Washington, DC, April.Google Scholar
  29. International Monetary Fund. (2005b): Global Financial Stability Report. Washington, DC, September.Google Scholar
  30. International Monetary Fund. (2006): Global Financial Stability Report. Washington, DC, April.Google Scholar
  31. 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
  32. 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.CrossRefGoogle Scholar
  33. Kiss, G and Vadas, G. 2005: The role of the housing market in monetary transmission. National Bank of Hungary Background Study 3.Google Scholar
  34. 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
  35. 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.CrossRefGoogle Scholar
  36. Maeso-Fernandez, F, Osbat, C and Schnatz, B. 2005: Pitfalls in estimating equilibrium exchange rates for transition economies. Economic Systems 29(2): 130–143.CrossRefGoogle Scholar
  37. 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
  38. Pesaran, MH, Shin, Yand Smith, R. 1999: Pooled mean group estimation of dynamic heterogeneous panels. Journal of the American Statistical Association 94: 621–634.CrossRefGoogle Scholar
  39. Rajan, RG. 1994: Why bank credit policies fluctuate: A theory and some evidence. Quarterly Journal of Economics 109(2): 399–441.CrossRefGoogle Scholar
  40. Rajan, RG and Zingales, L. 2001: Financial systems, industrial structure and growth. Oxford Review of Economic Policy 17(4): 461–482.CrossRefGoogle Scholar
  41. Schadler, S (ed) 2005: Euro Adoption in Central and Eastern Europe: Opportunities and Challenges. International Monetary Fund.Google Scholar
  42. Terrones, M and Mendoza, E. 2004: Are credit booms in emerging markets a concern? IMF, World Economic Outlook Chapter IV: 147–166.Google Scholar

Copyright information

© Balázs Égert, Peter Backé and Tina Zumer 2016

Authors and Affiliations

  • Balázs Égert
    • 1
    • 2
  • Peter Backé
    • 3
  • Tina Zumer
    • 4
  1. 1.Oesterreichische NationalbankAustria
  2. 2.William Davidson InstituteEconomiX at University of Paris X-NanterreFrance
  3. 3.Oesterreichische NationalbankFrance
  4. 4.European Central BankFrance

Personalised recommendations