A re-assessment of credit development in European transition economies

Abstract

The aim of the paper is to assess the dynamics of credit development in the aftermath of the 2008 international crisis for a group of 11 European transition economies. Specifically, using filtering methods and dynamic panel estimations, the paper analyzes whether the expansion in banking credit before the recent financial crisis could be considered as “excessive” and whether its recent slowdown could be seen as a “credit crunch”. Our results suggest that the countries that had been characterized by a larger and more protracted excessive credit before the onset of 2008 crisis have experienced the largest credit contraction.