From credit growth to credit crunch: Analysis of responses to credit development in Central and Eastern Europe

• Název práce v češtině: Od úvěrového růstu k úvěrové krizi: Analýza reakcí na úvěrový vývoj v regionu střední a východní Evropy
• Název v anglickém jazyce: From credit growth to credit crunch: Analysis of responses to credit development in Central and Eastern Europe
• Akademický rok vypsání: 2010/2011
• Typ práce: rigorózní práce
• Jazyk práce: angličtina
• Ústav: Institut ekonomických studií (23-IES)
• Vedoucí / školitel: doc. PhDr. Adam Geršl, Ph.D.
• Řešitel: skrytý - zadáno vedoucím/školitelem
• Datum přihlášení: 19.09.2011
• Datum zadání: 19.09.2011
• Datum a čas obhajoby: 19.10.2011 00:00
• Místo konání obhajoby: IES
• Datum odevzdání elektronické podoby: 19.09.2011
• Datum proběhlé obhajoby: 19.10.2011
• Oponenti: prof. PhDr. Tomáš Havránek, Ph.D.

Seznam odborné literatury

Bakker, B. B. & A.-M. Gulde (2010): “The Credit Boom in the EU New Member States: Bad Luck or Bad Policies?” IMF Working Paper WP/10/130, IMF. Paper introduced perspective on the credit boom from the post-boom (crisis) period. It is very much valuable as the majority of the literature on the credit boom in CEE was published ex ante.

Borio, C. (2003): “Towards a macroprudential framework for financial supervision and regulation?” CESifo Economic Studies 49(2): p. 181. Paper deals with the macroprudential framework – the most essential and the most popular group of policy tools analyzed in this thesis.

Blundell , R. & M. Costa Dias (2000): “Evaluation methods for non-experimental data.” Fiscal studies 21(4): pp. 427–468. The main source for application of difference-in-differences (DID method) in non-experimental data. The results indicate that excessive credit growth occurred in the countries
with fixed exchange rate regimes, i.e. three Baltic states and Bulgaria.

Egert, B., P. Backe, & T. Zumer (2006): “Credit Growth In Central And Eastern Europe: New (Over)Shooting Stars?” ECB Working Paper Series 687, ECB. One of the most influential papers written on modeling and assessment of excessiveness of the credit boom. The paper itself was revisited twice by the authors themselves, moreover it provided a benchmark for any analysis of the pace of the credit growth in countries in transition.
Revisited version and also used in this thesis:
Backe, P., B. Egert , & Z. Walko (2007): “Credit Growth in Central and Eastern Europe Revisited.” Focus on European Economic Integration, Oesterreichische Nationalbank 2: pp. 69–77.
Zumer, T., B. Egert, & P. Backe (2009): “Credit Developments in CEE: From boom to bust or back to balance?” Bancni vestnik, Slovenian National Bank 58: pp. 94–101.

Enoch, C. & I. Otker-Robe (2007): Rapid credit growth in Central and Eastern Europe: Endless boom or early warning? Palgrave Macmillan/International Monetary Fund. The most complex publication written on credit boom phenomenon in Central and Eastern Europe. The book consists of two parts – theoretical and empirical – and was published as a result of IMF conference on credit growth in the region. In particular, for the purpose of this thesis the most relevant sections were:
Boissay, F., C.-G. Oscar, & T. Kozluk (2007): “Using Fundamentals to Identify Episodes of ”Excessive” Credit Growth in Central and Eastern Europe.”
Duenwald , C., N. Gueorguiev , & A. Schaechter (2007): “Too Much of a Good Thing? Credit Booms in Transition Economies: The Cases of Bulgaria, Romania, and Ukraine.”
Popa, C. (2007): “Fast credit growth and policy response: The case of Romania.”

Galati, G. & R. Moessner (2011): “Macroprudential policy - a literature review.” Working paper 337, BIS. Literature review on application, advantages, challenges and limits of macroprudential policies. Macroprudential tools were one of the most common instruments used to slow down the credit growth.

Hilbers, P., I. Otker-Robe, C. Pazarbasioglu, & G. Johnsen (2005): “Assessing and Managing Rapid Credit Growth and the Role of Supervisory and Prudential Policies.” IMF Working Paper WP/05/151, IMF. The most concise study to summarize palette of policy responses that can be applied to counter credit growth. The paper also assesses the impact of measures until 2004.

IMF (2004): “Are Credit Booms in Emerging Markets a Concern?” In “IMF World Economic Outlook,” pp. 147–166. Study focusing in empirical findings of credit booms throughout the regions and recent history of emerging markets.

Kiss , G., M. Nagy , & B. Vonnak (2006): “Credit Growth in Central and Eastern Europe: Trend, Cycle or Boom?” Discussion paper, Magyar Nemzeti Bank. Kiss et al. (2006) use instrumental variable estimation technique to identify periods of boom (following the definition of IMF 2004) in 10 new EU member states.

Latvijas Banka (2007): “Financial Stability Report 2007.” Technical report, Latvijas Banka. Financial stability report of Latvia. Stability reports are used to help analyze the policy measures more closely. This FSR focuses on anti-inflationary plan in Latvia.

NBP (2007): “Financial Stability Review. First half of 2007.” Technical report, National Bank of Poland. Financial stability report of Polad. Stability reports are used to help analyze the policy measures more closely. This FSR focuses on Recommendation S in Poland.

Furthermore many more Financial Stability Reports are heavily used to in the empirical part to support the questionnaire results. In particular we work with FSR of all 11 CEE states published in the period 2003-2008.

Předběžná náplň práce v anglickém jazyce

This thesis tracks the period from credit growth to credit crunch (2003 - 2008) with a special focus on policy measures taken to alleviate the adverse effects of the credit growth. Credit growth is an inherently beneficial process. Its revivals are seen as sings of healthy banking system and confidence in the economy. Moreover, in case of CEE region the dynamics was also justified by catching-up with Western Europe. On the other hand, excessive credit growth increases imbalances and can contribute to amplifying vulnerabilities of the financial system.

In order to analyze the policy responses, we first need understand the nature of the phenomenon. In the first part the thesis we look closely at the issue: How much credit growth is too much? The answer will be provided by combination of concise literature findings and panel FE-OLS model that compares