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Volume 66, Issue 5

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The Role of the Real Exchange Rate in Credit Growth in Central and Eastern European Countries: A Bank-Level Analysis

Frömmel, Michael; Midilic, Murat

Year: 2016   Volume: 66   Issue: 5   Pages: 426-452

Abstract: This study analyzes the effects of macroeconomic and bank-level variables on the loan growth of banks in Central and Eastern European countries (CEECs) for the period between 1999 and 2010. Differences between private, state, domestic and foreign banks are analyzed by using the ownership structures of banks. We show that, unlike macroeconomic factors and other bank-level variables, leverage growth and equity growth have consistently significant effects on the loans of both domestic and foreign banks. The real exchange rate turns out to be a significant factor only for foreign banks. The latter result is important in understanding the transmission of global shocks to domestic credit. The results are robust to different specifications.

JEL classification: G21, F31

Keywords: credit growth, emerging markets, real exchange rate, leverage

RePEc: http://ideas.repec.org/a/fau/fauart/v66y2016i5p426-452.html

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