Duration Dependence and Change-Points in the Likelihood of Credit Booms Ending
Whether the likelihood of a credit boom ending is dependent on its age or not, or whether the respective behavior is smooth or bumpy are important issues to which the economic literature has not given attention yet. This paper tries to fill that ga...
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| Format: | Policy Research Working Paper |
| Language: | English en_US |
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World Bank, Washington, DC
2013
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| Subjects: | |
| Online Access: | http://documents.worldbank.org/curated/en/2013/06/17831597/duration-dependence-change-points-likelihood-credit-booms-ending http://hdl.handle.net/10986/15836 |
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okr-10986-15836 |
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oai_dc |
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Digital Repository |
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Foreign Institution |
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Digital Repositories |
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World Bank Open Knowledge Repository |
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World Bank |
| language |
English en_US |
| topic |
AMOUNT OF CREDIT ANNUAL GROWTH ASSET PRICE ASSET PRICES BALANCE SHEETS BANK DEPOSITS BANK LENDING BANKING CRISIS BANKING DISTRESS BANKING SECTOR BANKING SYSTEM BANKING SYSTEM STABILITY BUSINESS CYCLE BUSINESS CYCLES CAPITAL FLOW CAPITAL FLOWS CAPITAL INFLOW CAPITAL INFLOWS CAPITAL MARKETS CAPITAL MOBILITY COMMODITY PRICE CONSOLIDATION CONSOLIDATIONS CREDIT BOOM CREDIT BOOMS CREDIT GROWTH CREDIT MARKETS CURRENCY CURRENT ACCOUNT CURRENT ACCOUNT DEFICITS CYCLICAL FLUCTUATIONS DEBT DEFLATION DEPENDENT DEPOSIT DEPOSIT INSURANCE DERIVATIVE DESCRIPTIVE STATISTICS DEVELOPMENT POLICY DISTORTIONS DOMESTIC CREDIT DOMESTIC CURRENCY DOMESTIC DEMAND DUMMY VARIABLE DUMMY VARIABLES ECONOMETRIC ANALYSIS ECONOMETRIC MODELS ECONOMETRICS ECONOMIC ACTIVITY ECONOMIC ENVIRONMENT ECONOMIC GROWTH ECONOMIC RESEARCH ECONOMIC STATISTICS ECONOMICS LITERATURE EMERGING ECONOMIES EMERGING MARKET ECONOMIES EMPIRICAL ANALYSIS EXCHANGE RATE ARRANGEMENT EXCHANGE RATE FLEXIBILITY FINANCIAL CRISES FINANCIAL CRISIS FINANCIAL DISTRESS FINANCIAL FRAGILITY FINANCIAL INSTABILITY FINANCIAL INTEGRATION FINANCIAL INTERMEDIARIES FINANCIAL MARKETS FINANCIAL OPENNESS FINANCIAL REFORMS FINANCIAL SECTOR FINANCIAL SYSTEM FINANCIAL VULNERABILITY FISCAL POLICY FIXED EFFECTS FOREIGN CAPITAL FOREIGN CURRENCY FOREIGN EXCHANGE FUTURE FINANCIAL CRISIS GDP GENERAL EQUILIBRIUM GENERAL EQUILIBRIUM MODEL GLOBAL IMBALANCES GLOBAL LIQUIDITY GLOBALIZATION GROWTH RATE INDUSTRIAL ECONOMIES INFLEXIBLE EXCHANGE RATE REGIMES INTERNATIONAL CAPITAL INTERNATIONAL ECONOMICS INTERNATIONAL FINANCIAL STATISTICS LEADING INDICATORS LEVERAGE LIBERALIZATION LIQUIDITY LOOSE MONETARY POLICY MACROECONOMIC MODEL MACROECONOMIC POLICIES MACROECONOMIC POLICY MACROECONOMICS MONETARY ECONOMICS MONETARY POLICY OVERVALUATION POVERTY REDUCTION PRIVATE CAPITAL PRIVATE CREDIT PROPERTY RIGHTS RANDOM VARIABLE RAPID CREDIT EXPANSION RAPID GROWTH REAL EXCHANGE RATE RECESSION RECESSIONS RISK PREMIA RISK TAKING ROBUSTNESS CHECKS SECURITIES SETTLEMENTS STABILIZATION STANDARD DEVIATION STATISTICAL ANALYSIS SYSTEMIC BANK CRISIS SYSTEMIC BANKING CRISES SYSTEMIC BANKING CRISIS SYSTEMIC CRISES SYSTEMIC RISK TIME-INVARIANT VARIABLES TROUGH UNEMPLOYMENT VOLATILITY VULNERABILITY WEALTH duration analysis Weibull model duration dependence change-points |
| spellingShingle |
AMOUNT OF CREDIT ANNUAL GROWTH ASSET PRICE ASSET PRICES BALANCE SHEETS BANK DEPOSITS BANK LENDING BANKING CRISIS BANKING DISTRESS BANKING SECTOR BANKING SYSTEM BANKING SYSTEM STABILITY BUSINESS CYCLE BUSINESS CYCLES CAPITAL FLOW CAPITAL FLOWS CAPITAL INFLOW CAPITAL INFLOWS CAPITAL MARKETS CAPITAL MOBILITY COMMODITY PRICE CONSOLIDATION CONSOLIDATIONS CREDIT BOOM CREDIT BOOMS CREDIT GROWTH CREDIT MARKETS CURRENCY CURRENT ACCOUNT CURRENT ACCOUNT DEFICITS CYCLICAL FLUCTUATIONS DEBT DEFLATION DEPENDENT DEPOSIT DEPOSIT INSURANCE DERIVATIVE DESCRIPTIVE STATISTICS DEVELOPMENT POLICY DISTORTIONS DOMESTIC CREDIT DOMESTIC CURRENCY DOMESTIC DEMAND DUMMY VARIABLE DUMMY VARIABLES ECONOMETRIC ANALYSIS ECONOMETRIC MODELS ECONOMETRICS ECONOMIC ACTIVITY ECONOMIC ENVIRONMENT ECONOMIC GROWTH ECONOMIC RESEARCH ECONOMIC STATISTICS ECONOMICS LITERATURE EMERGING ECONOMIES EMERGING MARKET ECONOMIES EMPIRICAL ANALYSIS EXCHANGE RATE ARRANGEMENT EXCHANGE RATE FLEXIBILITY FINANCIAL CRISES FINANCIAL CRISIS FINANCIAL DISTRESS FINANCIAL FRAGILITY FINANCIAL INSTABILITY FINANCIAL INTEGRATION FINANCIAL INTERMEDIARIES FINANCIAL MARKETS FINANCIAL OPENNESS FINANCIAL REFORMS FINANCIAL SECTOR FINANCIAL SYSTEM FINANCIAL VULNERABILITY FISCAL POLICY FIXED EFFECTS FOREIGN CAPITAL FOREIGN CURRENCY FOREIGN EXCHANGE FUTURE FINANCIAL CRISIS GDP GENERAL EQUILIBRIUM GENERAL EQUILIBRIUM MODEL GLOBAL IMBALANCES GLOBAL LIQUIDITY GLOBALIZATION GROWTH RATE INDUSTRIAL ECONOMIES INFLEXIBLE EXCHANGE RATE REGIMES INTERNATIONAL CAPITAL INTERNATIONAL ECONOMICS INTERNATIONAL FINANCIAL STATISTICS LEADING INDICATORS LEVERAGE LIBERALIZATION LIQUIDITY LOOSE MONETARY POLICY MACROECONOMIC MODEL MACROECONOMIC POLICIES MACROECONOMIC POLICY MACROECONOMICS MONETARY ECONOMICS MONETARY POLICY OVERVALUATION POVERTY REDUCTION PRIVATE CAPITAL PRIVATE CREDIT PROPERTY RIGHTS RANDOM VARIABLE RAPID CREDIT EXPANSION RAPID GROWTH REAL EXCHANGE RATE RECESSION RECESSIONS RISK PREMIA RISK TAKING ROBUSTNESS CHECKS SECURITIES SETTLEMENTS STABILIZATION STANDARD DEVIATION STATISTICAL ANALYSIS SYSTEMIC BANK CRISIS SYSTEMIC BANKING CRISES SYSTEMIC BANKING CRISIS SYSTEMIC CRISES SYSTEMIC RISK TIME-INVARIANT VARIABLES TROUGH UNEMPLOYMENT VOLATILITY VULNERABILITY WEALTH duration analysis Weibull model duration dependence change-points Castro, Vitor Kubota, Megumi Duration Dependence and Change-Points in the Likelihood of Credit Booms Ending |
| relation |
Policy Research Working Paper;No. 6475 |
| description |
Whether the likelihood of a credit boom
ending is dependent on its age or not, or whether the
respective behavior is smooth or bumpy are important issues
to which the economic literature has not given attention
yet. This paper tries to fill that gap, exploring those
issues with a proper duration analysis. Credit booms are
identified considering two criteria well established in the
literature: (i) the Mendoza-Terrones criteria and (ii) and
the Gourinchas-Valdes-Landarretche criteria. A
continuous-time Weibull duration model is employed over a
group of 71 countries for the period 1975q1-2010q4 to
investigate whether credit booms are duration dependent or
not. The findings show that the likelihood of credit booms
ending increases over their duration and that these events
have become longer over the past decades. In addition, the
paper extends the baseline Weibull duration model in order
to allow for change-points in the duration dependence
parameter. The empirical findings support the presence of a
change-point: increasing positive duration dependence is
observed in booms that last less than eight to ten quarters,
but it becomes decreasing or even irrelevant for longer
events. Analogous results are found for those credit boom
episodes that are followed by systemic banking crisis (bad
credit booms). The findings also show that credit booms are,
on average, longer in industrial than in developing countries. |
| format |
Publications & Research :: Policy Research Working Paper |
| author |
Castro, Vitor Kubota, Megumi |
| author_facet |
Castro, Vitor Kubota, Megumi |
| author_sort |
Castro, Vitor |
| title |
Duration Dependence and Change-Points in the Likelihood of Credit Booms Ending |
| title_short |
Duration Dependence and Change-Points in the Likelihood of Credit Booms Ending |
| title_full |
Duration Dependence and Change-Points in the Likelihood of Credit Booms Ending |
| title_fullStr |
Duration Dependence and Change-Points in the Likelihood of Credit Booms Ending |
| title_full_unstemmed |
Duration Dependence and Change-Points in the Likelihood of Credit Booms Ending |
| title_sort |
duration dependence and change-points in the likelihood of credit booms ending |
| publisher |
World Bank, Washington, DC |
| publishDate |
2013 |
| url |
http://documents.worldbank.org/curated/en/2013/06/17831597/duration-dependence-change-points-likelihood-credit-booms-ending http://hdl.handle.net/10986/15836 |
| _version_ |
1764431574766452736 |
| spelling |
okr-10986-158362021-04-23T14:03:23Z Duration Dependence and Change-Points in the Likelihood of Credit Booms Ending Castro, Vitor Kubota, Megumi AMOUNT OF CREDIT ANNUAL GROWTH ASSET PRICE ASSET PRICES BALANCE SHEETS BANK DEPOSITS BANK LENDING BANKING CRISIS BANKING DISTRESS BANKING SECTOR BANKING SYSTEM BANKING SYSTEM STABILITY BUSINESS CYCLE BUSINESS CYCLES CAPITAL FLOW CAPITAL FLOWS CAPITAL INFLOW CAPITAL INFLOWS CAPITAL MARKETS CAPITAL MOBILITY COMMODITY PRICE CONSOLIDATION CONSOLIDATIONS CREDIT BOOM CREDIT BOOMS CREDIT GROWTH CREDIT MARKETS CURRENCY CURRENT ACCOUNT CURRENT ACCOUNT DEFICITS CYCLICAL FLUCTUATIONS DEBT DEFLATION DEPENDENT DEPOSIT DEPOSIT INSURANCE DERIVATIVE DESCRIPTIVE STATISTICS DEVELOPMENT POLICY DISTORTIONS DOMESTIC CREDIT DOMESTIC CURRENCY DOMESTIC DEMAND DUMMY VARIABLE DUMMY VARIABLES ECONOMETRIC ANALYSIS ECONOMETRIC MODELS ECONOMETRICS ECONOMIC ACTIVITY ECONOMIC ENVIRONMENT ECONOMIC GROWTH ECONOMIC RESEARCH ECONOMIC STATISTICS ECONOMICS LITERATURE EMERGING ECONOMIES EMERGING MARKET ECONOMIES EMPIRICAL ANALYSIS EXCHANGE RATE ARRANGEMENT EXCHANGE RATE FLEXIBILITY FINANCIAL CRISES FINANCIAL CRISIS FINANCIAL DISTRESS FINANCIAL FRAGILITY FINANCIAL INSTABILITY FINANCIAL INTEGRATION FINANCIAL INTERMEDIARIES FINANCIAL MARKETS FINANCIAL OPENNESS FINANCIAL REFORMS FINANCIAL SECTOR FINANCIAL SYSTEM FINANCIAL VULNERABILITY FISCAL POLICY FIXED EFFECTS FOREIGN CAPITAL FOREIGN CURRENCY FOREIGN EXCHANGE FUTURE FINANCIAL CRISIS GDP GENERAL EQUILIBRIUM GENERAL EQUILIBRIUM MODEL GLOBAL IMBALANCES GLOBAL LIQUIDITY GLOBALIZATION GROWTH RATE INDUSTRIAL ECONOMIES INFLEXIBLE EXCHANGE RATE REGIMES INTERNATIONAL CAPITAL INTERNATIONAL ECONOMICS INTERNATIONAL FINANCIAL STATISTICS LEADING INDICATORS LEVERAGE LIBERALIZATION LIQUIDITY LOOSE MONETARY POLICY MACROECONOMIC MODEL MACROECONOMIC POLICIES MACROECONOMIC POLICY MACROECONOMICS MONETARY ECONOMICS MONETARY POLICY OVERVALUATION POVERTY REDUCTION PRIVATE CAPITAL PRIVATE CREDIT PROPERTY RIGHTS RANDOM VARIABLE RAPID CREDIT EXPANSION RAPID GROWTH REAL EXCHANGE RATE RECESSION RECESSIONS RISK PREMIA RISK TAKING ROBUSTNESS CHECKS SECURITIES SETTLEMENTS STABILIZATION STANDARD DEVIATION STATISTICAL ANALYSIS SYSTEMIC BANK CRISIS SYSTEMIC BANKING CRISES SYSTEMIC BANKING CRISIS SYSTEMIC CRISES SYSTEMIC RISK TIME-INVARIANT VARIABLES TROUGH UNEMPLOYMENT VOLATILITY VULNERABILITY WEALTH duration analysis Weibull model duration dependence change-points Whether the likelihood of a credit boom ending is dependent on its age or not, or whether the respective behavior is smooth or bumpy are important issues to which the economic literature has not given attention yet. This paper tries to fill that gap, exploring those issues with a proper duration analysis. Credit booms are identified considering two criteria well established in the literature: (i) the Mendoza-Terrones criteria and (ii) and the Gourinchas-Valdes-Landarretche criteria. A continuous-time Weibull duration model is employed over a group of 71 countries for the period 1975q1-2010q4 to investigate whether credit booms are duration dependent or not. The findings show that the likelihood of credit booms ending increases over their duration and that these events have become longer over the past decades. In addition, the paper extends the baseline Weibull duration model in order to allow for change-points in the duration dependence parameter. The empirical findings support the presence of a change-point: increasing positive duration dependence is observed in booms that last less than eight to ten quarters, but it becomes decreasing or even irrelevant for longer events. Analogous results are found for those credit boom episodes that are followed by systemic banking crisis (bad credit booms). The findings also show that credit booms are, on average, longer in industrial than in developing countries. 2013-09-26T13:43:31Z 2013-09-26T13:43:31Z 2013-06 http://documents.worldbank.org/curated/en/2013/06/17831597/duration-dependence-change-points-likelihood-credit-booms-ending http://hdl.handle.net/10986/15836 English en_US Policy Research Working Paper;No. 6475 CC BY 3.0 IGO http://creativecommons.org/licenses/by/3.0/igo/ World Bank World Bank, Washington, DC Publications & Research :: Policy Research Working Paper Publications & Research |