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Credit market developments and sectoral business cycles worldwide

Published online by Cambridge University Press:  08 February 2023

Talat Ulussever  and
Mustafa Kilinc
Talat Ulussever*
Affiliation:
Economics and Finance Department, Gulf University for Science & Technology (GUST), Kuwait Research Fellow, Center for Sustainable Energy and Economic Development (SEED), Gulf University for Science & Technology (GUST), Kuwait
Mustafa Kilinc
Affiliation:
Independent Researcher, Ankara, Turkey
*
*Corresponding author. Email: ulussever.t@gust.edu.kw
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Abstract

This paper investigates the relationship between credits and sector-level output dynamics in a sample of 41 advanced and developing countries. The existing literature shows that household credits are associated with boom-bust cycles in aggregate output, whereas business loans do not cause such output dynamics. The present paper expands these findings in terms of advanced versus developing countries and manufacturing versus services sectors. The new findings indicate that the resulting boom-bust cycles in the aggregate output in response to household credits are generally observed in the sample of developing countries, with no similar dynamics in the advanced countries. Another significant conclusion is that the boom-bust cycles are generated mostly in the services sector. No equivalent boom-bust dynamics are observed in the manufacturing sector, but the negative medium-run effects of household credits are larger in this sector. These findings indicate that credit mechanisms and consequences can significantly vary across countries and sectors.

Keywords

Credit cycleshousehold creditssectoral outputbusiness cycles
Type
Articles
Information
Macroeconomic Dynamics , Volume 28 , Issue 1 , January 2024 , pp. 147 - 203
Copyright
© The Author(s), 2023. Published by Cambridge University Press

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Footnotes

†

These authors contributed equally to this work.

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