Publication detail

From Credit Boom to Credit Crunch: Effectiveness of policy measures in Central and Eastern Europe

Author(s): doc. PhDr. Adam Geršl Ph.D.,
Martina Jašová ,
Type: Articles in refereed journals
Year: 2012
Number: 1
ISSN / ISBN: 2289-1552
Published in: International Journal of Business, Economics and Law
Publishing place: Kuala Lumpur, Malaysia
Keywords: Credit growth, monetary policy, macroprudential policy, Central and Eastern Europe
JEL codes:
Suggested Citation:
Grants: GAUK 564612 - Macroprudential policy in the periods of excessive credit growth
Abstract: This paper tracks the experience of eleven Central and Eastern European economies (CEE) on their way from credit boom to credit crunch (2003-2008). The analysis is focused on policy measures taken to alleviate the adverse effects of the credit expansion in the region. Until the eve of global financial crisis, majority of the CEE economies witnesses an unprecedented credit boom. With the impact of the crisis, the growth was suddenly discontinued and turned into a credit crunch. The paper is based on an original survey performed on all central banks in the CEE region. The survey covered three main types of interventions: a) monetary policy measures, b) macroprudential and supervisory measures and c) administrative and other administrative measures. Overall intensity of interventions is very high: findings confirm 82 measures taken in the region over the period of six years. Policy measures entailed both single and multiple instruments applied at a time. Furthermore, data reveal various paths of credit development and degrees of interventions to dampen the credit dynamics. Exchange rate regimes proved to matter both in scale ands scope of the responses. The assessment of the effectiveness of specific measures is the most challenging issue to address. This paper combines the direct assessment of particular central authorities and a difference-in-differences method that compares introduction of an instrument with a counterfactual scenario where no intervention was implemented. Deriving from the country experiences, the paper argues that in order to eliminate adverse impacts, policy measures should include combination of monetary and macroprudential tools with special emphasis on domestic environment and role of foreign banks in the CEE region.

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