*This project has been generously supported by Fondation Banque de France and the Institute for New Economic Thinking. We thank Matthieu Bussiere, the participants at seminars at the Banque de France, Banca d'Espana and the Bank for International Settlements, and the three anonymous referees for helpful comments. We thank Barbara Pels, Caroline Mehigan, and Clemens Struck for research assistance. The opinions expressed in this paper are those of the authors and should not be attributed to the European Central Bank.
Domestic Credit Growth and International Capital Flows*
Article first published online: 30 DEC 2013
© The editors of The Scandinavian Journal of Economics 2013.
The Scandinavian Journal of Economics
Volume 116, Issue 1, pages 218–252, January 2014
How to Cite
Lane, P. R. and McQuade, P. (2014), Domestic Credit Growth and International Capital Flows. The Scandinavian Journal of Economics, 116: 218–252. doi: 10.1111/sjoe.12038
- Issue published online: 30 DEC 2013
- Article first published online: 30 DEC 2013
- Financial globalization;
- financial stability;
- macroprudential regulation;
During the pre-crisis period, Europe experienced substantial cross-country variation in domestic credit growth and cross-border capital flows. We investigate the inter-relations between domestic credit growth and international capital flows during the period 1993–2008, with a special focus on the boom period of 2003–2008. We establish that domestic credit growth in European countries is strongly related to net debt inflows but not to net equity inflows. This pattern also holds for an extended sample of 54 advanced and emerging economies.