The effect of episodes of large capital inflows on domestic credit

Davide Furceri, Davide Furceri, Elena Rusticelli, Stéphanie Guichard

Risultato della ricerca: Article

17 Citazioni (Scopus)

Abstract

This paper analyses the effect of capital inflow surges on the evolution of domestic credit. Using a panel of developed and emerging economies from 1970 to 2007, it is shown that in the two years following the beginning of a capital inflow surge the credit-to-GDP ratio increases by about 2 percentage points. The effect is reversed in the medium-term with the credit-to-GDP ratio decreased by almost 4 percentage points seven years after the initial surge. The paper also finds that the effect is different depending on the type of flows characterising the episode (debt vs. portfolio equity vs. FDI), with large capital inflows that are debt-driven having the largest effect. The results of the paper also suggest that the short-term effect of capital inflow surges on domestic credit depends on countries’ macroeconomic policy stances. In particular, it is found that this effect is lower in countries with higher real exchange rate flexibility and fiscal policy counter-cyclicality.
Lingua originaleEnglish
pagine (da-a)325-344
Numero di pagine20
RivistaTHE NORTH AMERICAN JOURNAL OF ECONOMICS AND FINANCE
Volume23
Stato di pubblicazionePublished - 2012

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All Science Journal Classification (ASJC) codes

  • Finance
  • Economics and Econometrics

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