Credit Deepening and Banking Fragility : Evidence from Panel Data Analysis
This paper investigates the consequence of credit deepening for the stability of the financial system. Our main argument is that credit deepening may be driven by excessive risk-taking in the banking sector. In this case, the financial system creates additional debt, which needs to be repaid by future income. As the link between credit and income growth becomes weak, the probability that debt obligations can be fulfilled gets smaller. Consequently, the financial system will be faced with a higher risk of default and, therefore, financial fragility increases. Using a database of 124 countries over the period 2000-2012, we find that financial fragility is strongly associated with credit expansion. This association is robust to different specifications of the baseline model
Year of publication: |
[2023]
|
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Authors: | Peng, Yiqing |
Publisher: |
[S.l.] : SSRN |
Subject: | Panel | Panel study | Kreditgeschäft | Bank lending | Welt | World | Schätzung | Estimation | Bankrisiko | Bank risk | Bankenkrise | Banking crisis | Bank |
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