Abstract
In this article, we set ourselves the task of explaining the phenomenon of the credit cycle’s resilience. Some studies show that credit cyclicity is stable, at least during the last 160 years. At the same time, most of the instruments and measures used for curbing the cycle do not bring tangible and visible results. In this regard, we have set the task of systematizing the existing studies on the issue. In particular, in this paper we’ve analysed the potential effectiveness of various measures in the abolition of or mitigating the credit cycle. These included a change in capital requirements of commercial banks, the evolution of credit risk evaluation methods, changes in the targets of monetary policy, a degree of institutional development of the economy, a level of competitive pressure on the credit market, targets for non-performing loans, credit rationing policies. As a result of the carried out comparative theoretical research, we came to conclusion that none of the above mentioned tools is an effective medicine, which can cure the credit market from the cyclical pattern of its existence. However, the experience of Asian region, in particular the use of directed credit distribution and establishing targets on non-performing loans and loan losses significantly reduces an amplitude of the cycle, however, at the price of higher credit rationing levels.
Highlights
Credit cyclicity along with the phenomenon of the business cycle holds the title of one of the main puzzles of the economic realm
In this paper we’ve analysed the potential effectiveness of various measures in the abolition of or mitigating the credit cycle. These included a change in capital requirements of commercial banks, the evolution of credit risk evaluation methods, changes in the targets of monetary policy, a degree of institutional development of the economy, a level of competitive pressure on the credit market, targets for non-performing loans, credit rationing policies
As a result of the carried out comparative theoretical research, we came to conclusion that none of the above mentioned tools is an effective medicine, which can cure the credit market from the cyclical pattern of its existence
Summary
Credit cyclicity along with the phenomenon of the business cycle holds the title of one of the main puzzles of the economic realm. Various attempts to eliminate it, to curb or mitigate, one way or another, are based on a certain theoretical foundation It is this foundation that serves as a necessary basis for the conduct of a specific monetary policy framework and for the formation of preferences for using one instrument in relation to other. The structure of this paper is organized as follows and includes the following sections: section 2 presents a brief summary of methodological approaches used for the analysis of credit cycle’s resilience phenomena; section 3 gives an overview of existing methods for eliminating or curbing the credit cycle and presents the analysis of them in order to determine their absolute or relative appropriateness for achieving the above mentioned goal; section 4 summarizes the results of the conducted study; section 5 presents a bibliographical list of proceeding used in the preparation and conduct of this study
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