Determinants of Credit-Less Recoveries

33 Pages Posted: 23 Jun 2011

See all articles by Martin Bijsterbosch

Martin Bijsterbosch

European Central Bank (ECB)

Tatjana Dahlhaus

Autonomous University of Barcelona - Department of Economics and Economic History

Date Written: June 15, 2011

Abstract

This paper aims to shed light on the characteristics and particularly the determinants of credit-less recoveries. After building a dataset and documenting some stylised facts of credit-less recoveries in emerging market economies, this paper uses panel probit models to analyse key determinants of credit-less recoveries. Our main findings are the following. First, our frequency analysis confirms earlier findings that credit-less recoveries are not at all rare events. Moreover, our analysis shows that the frequency of credit-less recoveries doubles after a banking or currency crisis. Second, results from estimated panel probit models suggest that credit-less recoveries are typically preceded by large declines in economic activity and financial stress, in particular if private sector indebtedness is high and the country is reliant on foreign capital inflows. Finally, we find that the predicted probability of a credit-less recovery in central and eastern European EU Member States during the coming years varies across countries, but is relatively high in the Baltic States.

Keywords: Credit-less Recoveries, Financial Crises, Panel Probit Models

JEL Classification: C23, C25, E32, E51, G01

Suggested Citation

Bijsterbosch, Martin and Dahlhaus, Tatjana, Determinants of Credit-Less Recoveries (June 15, 2011). ECB Working Paper No. 1358, Available at SSRN: https://ssrn.com/abstract=1865215 or http://dx.doi.org/10.2139/ssrn.1865215

Martin Bijsterbosch (Contact Author)

European Central Bank (ECB) ( email )

Sonnemannstrasse 22
Frankfurt am Main, 60314
Germany

Tatjana Dahlhaus

Autonomous University of Barcelona - Department of Economics and Economic History ( email )

Edifici B - Campus Bellaterra
Barcelona, 08193
Spain

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