Type
Article
Titre
The intertwining of credit and banking fragility
Dans
International Journal of Finance and Economics
Auteur(s)
CREEL Jérôme - Observatoire français des conjonctures économiques (Auteur)
HUBERT Paul - Observatoire français des conjonctures économiques (Auteur)
LABONDANCE Fabien - Observatoire français des conjonctures économiques (Auteur)
Éditeur
GB
Pages
1 - 17 p.
ISSN
10769307
Mots clés
Banking fragility, Credit growth, Nonperforming loans, SUR model
Résumé
EN
Although the literature has provided evidence of the predictive power of credit for financial and banking crises, this article aims to investigate the grounds of this link by assessing the interrelationships between credit and banking fragility. The main identification assumption represents credit and banking fragility as a system of simultaneous joint data generating processes whose error terms are correlated. We test the null hypotheses that credit positively affects banking fragility—a vulnerability effect—and that banking fragility has a negative effect on credit—a trauma effect. We use seemingly unrelated regressions and 3SLS on a panel of European Union (EU) countries from 1998 to 2012 and control for the financial and macroeconomic environment. We find a positive effect of credit on banking fragility in the EU as a whole, in the Eurozone, in the core of the EU but not at its periphery, and a negative effect of banking fragility on credit in all samples.

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