Domestic Credit Growth and International Capital Flows*

Abstract

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Partners, not debtors: The external liabilities of emerging market economies

“…Our results is consistent with several studies, such as those of Caballero (2014) and Lane and McQuade (2014), that have shown that debt inflows are linked to the growth of domestic credit, and often more bank crises.…”

Financial Globalisation and the Crisis

“…For a sample of European countries, Lane and McQuade (2012) find that international capital inflows were indeed correlated with domestic credit growth during the 2003-2008 pre-crisis period. In particular, a high level of net debt inflows was associated with more rapid domestic credit growth, as is shown in Figure ??.…”

Does Government Debt Affect Bank Credit?

“…In other words, the adverse effects of public debt on private credit growth might be reduced if countries can raise funds abroad (see Lane and McQuade 2013 for an application to European countries for the 2003-08 boom period).…”