Europe experienced substantial cross-country variation in domestic credit growth and cross border capital flows during the pre-crisis period. We investigate the inter-relations between domestic credit growth and international capital flows over 1993-2008, with a special focus on the 2003-2008...

Between 2000 and 2007 nonfinancial private sector credit expanded rapidly in the Baltic countries, resulting in a non-negligible build-up of debt. Could this legacy debt hold back the economic recovery of the region? This paper analyzes the setting in each of the three countries and, with the...