The Credit Boom in the EU New Member States: Bad Luck or Bad Policies?

By B. Bakker, Anne-Marie Gulde. Social Science Research Network, 2010

142 citations recorded by the source corpus.

In the past decade, most of the EU New Member States experienced a severe credit-boom bust cycle. This paper argues that the credit boom-bust cycle was to a large extent the result of factors external to the region (“bad luck�). Rapid credit growth followed from a high liquidity in global markets and the particular attractiveness of “new Europe� for capital flows, while the end of the credit cycle was brought about by a global crisis. However, the fact that some countries managed to avoid most of the excesses, including asset price bubbles and foreign exchange lending, suggests that policies and policy failures (“bad policies�)—in particular overly expansionary macroeconomic settings and excessively optimistic views on prudential risks—also have played a critical role.

Subfields: Finance

View Paper: https://www.semanticscholar.org/paper/7f086fdacb16e608f0a962f30905e29b4bb2cef4

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Citations in the corpus

• The Impact of Geopolitical Risks on Financial Development: Evidence from Emerging Markets (2020, methodology): “According to the findings of the Sargan test, there is no “over-identification problem” in the LSDVC estimations, and consistent with the autocorrelation test for the AR(1) and AR(2) models, a significant first-order autocorrelation is indicated, whereas the second-order autocorrelation is statistic”
• Capital Inflows, Exchange Rate Flexibility, and Credit Booms (2011, unknown): “Bakker and Gulde (2010) analyze the experience of new EU member states in Emerging Europe in the context of large capital inflows during the 2000s. They notice that, as economic activity and inflation accelerate, credit booms in countries with fixed exchange rate regimes are difficult to contain—as ”