Events at CERGE-EI

Let us invite you to a Brown Bag Seminar by Anna Pestova (CERGE-EI PhD student)
on Monday, September 26, 2022, at 13:00 in room 402. 

You can join also online: Lifesize link: https://call.lifesizecloud.com/15831656, password: 7699

Presenter: Anna Pestova

Title: "Bank Credit and the Risk of Recession: the Role of Business Cycle Shocks"

Abstract: "Bank credit growth affects recession risk non-monotonically and with a change of sign: within a year, a one standard deviation increase in bank credit to GDP ratio decreases the likelihood of a recession by up to 4 p.p. in a sample of 25 emerging and developed economies, whereas in the longer run---within three years --- the same credit expansion raises the recession risk by nearly 10 p.p. We find that domestic aggregate demand shocks solely explain the non-monotone sign-changing response of recession while other business cycle shocks only increase the probability of recession. The effect of bank credit on recession is more pronounced (i) for open and emerging economies and under credit booms accompanied by (ii) low-income growth, and (iii) high asset price growth."