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Credit Growth and Bank Soundness: Fast and Furious?
Author/Editor: Deniz Igan, Marcelo Pinheiro
Release Date: © December, 2011
ISBN : 978-1-46392-595-6
Stock #: WPIEA2011278
Stock Status: On back-order
Languages and formats available
We examine the risks to bank soundness associated with credit booms in a large set of countries. Using bank-level data in 90 countries between 1995 and 2005, we analyze the relationship between credit growth and bank soundness taking into account the potential two-way causality. We find that, while sounder banks tend to grow faster at moderate-growth periods, credit growth becomes less dependent on soundness during booms. These findings shed some light on why credit booms are often associated with financial crises.
More publications in this series: Working Papers