The Non-Bank Credit Cycle

Kemp, Esti; Stralen, Rene van; Vardoulakis, Alexandros; Wierts, Peter J.

doi:10.17016/FEDS.2018.076

Working Paper

The Non-Bank Credit Cycle

Abstract: We investigate the cyclical properties of non-bank credit and its relevance for financial stability. We construct a measure of non-bank credit for a large sample of countries and find that its cyclical properties differ from those of bank credit. Non-bank credit cycles are highly correlated with bank credit cycles in some countries but not in others. Moreover, non-bank credit cycles are less synchronised than bank credit cycles across countries. Finally, non-bank credit cycles could act as a leading indicator for currency, but not for systemic banking, crises. The opposite is true for bank credit cycles. These findings highlight the value added of monitoring non-bank credit.

Keywords: credit cycles; Financial crisis; leading indicators; Non-bank credit;

JEL Classification: G01; G23; F34;

https://doi.org/10.17016/FEDS.2018.076