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Banking crises and nonlinear linkages between credit and output

Serwa, Dobromił (2007): Banking crises and nonlinear linkages between credit and output.

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Abstract

The paper employs a recently developed procedure, based on a bivariate Markov switching model, to analyze the asymmetric causality linkages between credit growth and output growth during banking crises. Using a sample of 103 banking crises, we find that neither credit nor output leads the other variable in calm and crisis periods, although there is evidence of instantaneous regime-interdependence between the banking and real sector during crises. The linear link between credit growth and output growth is also regime-dependent.

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