Lending Booms: Latin America and the World / Pierre-Olivier Gourinchas, Rodrigo Valdes, Oscar Landerretche.

Format:

Book

Author/Creator:

Gourinchas, Pierre-Olivier.

Contributor:

National Bureau of Economic Research.

Valdes, Rodrigo.

Landerretche, Oscar.

Series:

Working Paper Series (National Bureau of Economic Research) no. w8249.

NBER working paper series no. w8249

Language:

English

Subjects (All):

Balance of payments.

Financial crises.

Loans, Foreign.

International liquidity.

Physical Description:

1 online resource: illustrations (black and white);

Other Title:

Lending Booms

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2001.

Cambridge, Massachusetts : National Bureau of Economic Research, 2001.

Summary:

Recent theories of crisis put lending booms at the root of financial collapses. Yet lending booms may be a natural consequence of economic development and fluctuations. So are lending booms dangerous? In this paper, we investigate empirically this question using a broad sample of lending boom episodes over 40 years, with a special eye for Latin America. Our results indicate that (1) lending booms are often associated with (i) a domestic investment boom; (ii) an increase in domestic interest rates; (iii) a worsening of the current account; (iv) a declines in reserves; (v) a real appreciation; (vi) a decline in output growth, (2) 'typical' lending booms do not increase substantially the vulnerability of the banking sector or the balance of payments. Comparing Latin America and the rest of the world, we find that Latin America lending booms make the economy considerably more volatile and vulnerable to financial and balance of payment crisis.

Notes:

Print version record

April 2001.