The collapse of credit booms: A competing risks analysis
Vitor Castro
Rodrigo Martins
2134/11323679.v1
https://repository.lboro.ac.uk/articles/journal_contribution/The_collapse_of_credit_booms_A_competing_risks_analysis/11323679
This paper analyses the collapse of credit booms by using a discrete-time competing
risks duration model over a panel of 67 countries for the period 1975q1-2016q4 to disentangle
the factors behind the length of benign and harmful credit booms. The results show that
economic growth and monetary authorities play the major role in explaining the differences in
the length and outcome of credit booms. While more growth contributes to longer booms that
are more likely to land softly, higher interest rates and central bank independence cut credit
booms short but make hard landings more likely. Moreover, we found that the longer a credit
boom lasts the more likely it is to end in a systemic banking crisis. Although both types of
credit expansions have an increasing probability of ending, as they grow older - exhibiting
positive duration dependence - hard landing credit booms have proven to be statistically
longer.
2019-12-09 14:32:26
Economics
Credit booms
Duration analysis
Competing risks model
Multinomial logit
Central Bank independence
Economics