Duration Dependence and Change-Points in the Likelihood of Credit Booms Ending

Castro, Vitor ; Kubota, Megumi

World Bank, Washington, DC

关键词: AMOUNT OF CREDIT;    ANNUAL GROWTH;    ASSET PRICE;    ASSET PRICES;    BALANCE SHEETS;   

DOI  :  10.1596/1813-9450-6475
RP-ID  :  WPS6475

学科分类：社会科学、人文和艺术（综合）

来源: World Bank Open Knowledge Repository

【 摘 要 】

Whether the likelihood of a credit boomending is dependent on its age or not, or whether therespective behavior is smooth or bumpy are important issuesto which the economic literature has not given attentionyet. This paper tries to fill that gap, exploring thoseissues with a proper duration analysis. Credit booms areidentified considering two criteria well established in theliterature: (i) the Mendoza-Terrones criteria and (ii) andthe Gourinchas-Valdes-Landarretche criteria. Acontinuous-time Weibull duration model is employed over agroup of 71 countries for the period 1975q1-2010q4 toinvestigate whether credit booms are duration dependent ornot. The findings show that the likelihood of credit boomsending increases over their duration and that these eventshave become longer over the past decades. In addition, thepaper extends the baseline Weibull duration model in orderto allow for change-points in the duration dependenceparameter. The empirical findings support the presence of achange-point: increasing positive duration dependence isobserved in booms that last less than eight to ten quarters,but it becomes decreasing or even irrelevant for longerevents. Analogous results are found for those credit boomepisodes that are followed by systemic banking crisis (badcredit booms). The findings also show that credit booms are,on average, longer in industrial than in developing countries.