Who is to blame for the credit crunch: foreign ownership or foreign funding?
Erik Feyen, Raquel Letelier, Inessa Love, Samuel Munzele Maimbo, Roberto Rocha, 15 March 2014
Eastern Europe was hit especially hard by the credit crunch during the global financial crisis. This column presents new evidence suggesting that reliance on foreign funding was more important than foreign bank ownership per se in exacerbating the post-crisis credit contraction. These findings point to the need to put more emphasis on the discussion of bank business models, regulatory standards, and supervisory arrangements.
From boom to crunch
Although most developing countries around the world experienced a severe contraction of bank credit during the recent global financial crisis, the Eastern Europe and Central Asia (ECA) region was disproportionately hit after it had experienced very high credit growth (Figure 1).
Figure 1. Banking system trends in ECA
Topics: Financial markets, Global crisis, International finance
Tags: banking, Central Asia, Credit crunch, credit growth, cross-border banking, Eastern Europe, global financial crisis
Real-estate valuation, current-account and credit growth patterns, before and after the 2008-09 Crisis
Joshua Aizenman, Yothin Jinjarak, 2 July 2013
The Global Crisis sparked a vibrant debate about what factors were to blame. This column addresses one of the core questions of this debate: are global imbalances or excessive credit growth key suspects? Presenting new research, it’s clear that the painful adjustment in the real-estate markets of the US, Spain and other affected countries in the aftermath of the Crisis, and the key importance of momentum effects, call for further research on policies that can mitigate possible bubble-dynamics.
The Global Crisis sparked a vibrant debate about what factors contributed to the Crisis. One question remains central to the debate:
Topics: Global crisis
Tags: credit growth, housing, real estate