Credit-to-GDP ratios – non-linear trends and persistence: evidence from 44 OECD economies

Abstract

PurposeIn particular, in this article, the authors investigate the degree of persistence in the credit-to-gross domestic product (GDP) ratio in 44 Organisation for Economic Co-operation and Development (OECD) economies in the context of nonlinear deterministic trends.Design/methodology/approachThe authors use Chebyshev's polynomials in time, which allow us to model changes in the data in a smoother way than by structural breaks.FindingsThis study’s results indicate that approximately one-quarter of the series display non-linear structures, and only Argentina displays a mean reverting pattern.Research limitations/implicationsPolicy implications of the results obtained are discussed at the end of the manuscript.Originality/valueThe authors use an approach developed that allows for non-linear trends based on Chebyshev polynomials in time, with the residuals being fractionally integrated or integrated of order d, where d can be any real value.

Relationship between Islamic bank consumptive financing and gross regional domestic product in Indonesia, 2016-2020

“…Likewise, Caporale & Helmi (2018) suggest in their research that the government should develop policies aimed at increasing the proportion of investment and productive credit, while limiting speculative credit. This stimulates economic growth and helps to avoid a global financial crisis (Cuestas et al, 2023). Allocating credit directly related to actual economic activities can foster long-term economic growth (Caporale & Helmi, 2018;Fatmawati, 2022).…”