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Recovery from crises and lending

Author

Listed:
  • Katalin Bodnár
  • Zsolt Kovalszky
  • Emese Hudák

    (Magyar Nemzeti Bank)

Abstract
During the recovery from the recent crisis, the general role of lending in economic growth, and particularly in the recovery from financial crises, has become an important issue. In this paper, we review the major differences between creditless recovery episodes and recoveries accompanied by growth of credit. Based on the literature, we find that creditless recoveries are relatively frequent phenomena: a quarter or one-fifth of all real economy recoveries take place without the growth of credit. The rate of economic growth is permanently lower during creditless recoveries than in episodes accompanied by credit expansion. Thus, lending activity of the financial intermediary system is usually necessary for fast recovery. When analysing the recovery from the current crisis, we find that a number of factors exist that predispose to creditless recovery. The current growth, the rate of which is lower than before the crisis, is taking place – both in the Member States of the European Union and in Hungary – with a decrease or stagnation of the credit stock. In the medium and long term, it is essential for the sustained growth of the real economy that loans granted by the financial intermediary system once again start to increase.

Suggested Citation

  • Katalin Bodnár & Zsolt Kovalszky & Emese Hudák, 2014. "Recovery from crises and lending," Financial and Economic Review, Magyar Nemzeti Bank (Central Bank of Hungary), vol. 13(4), pages 57-85.
    • Handle: RePEc:mnb:finrev:v:13:y:2014:i:4:p:57-85
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    References listed on IDEAS

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    Cited by:

    1. Ádám Balog, 2018. "Analysis of SME Segment Lending Processes in Light of Credit Guarantees in the European Union," Financial and Economic Review, Magyar Nemzeti Bank (Central Bank of Hungary), vol. 17(1), pages 62-82.
    2. Varga, József & Temuulen, Elbegdorj & Bareith, Tibor, 2019. "An Empirical Analysis of the Relationship between Economic Growth and Credit Volumes in Hungary," Public Finance Quarterly, Corvinus University of Budapest, vol. 64(4), pages 455-470.
    3. Corrado, Luisa & Rossi, Isolina, 2019. "Anatomy of credit-less recoveries," Journal of Macroeconomics, Elsevier, vol. 62(C).

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    More about this item

    Keywords

    economic growth; financial crises; recovery; lending; Hungary;
    All these keywords.

    JEL classification:

    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • G01 - Financial Economics - - General - - - Financial Crises
    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General

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