The role of credit and housing shocks in emerging economies

ABSTRACT

This article investigates the role played by credit and housing shocks in emerging markets through a Bayesian panel vector autoregression for 15 countries. Identification is achieved by sign restrictions, and our findings suggest that credit and housing shocks have a similar contribution to the forecast error variance of the gross domestic product growth at the 25-quarter horizon. However, for the investment-to-GDP ratio, credit shocks seem to be more relevant.

KEYWORDS:

• Bayesian panel VAR
• emerging markets business cycles
• credit conditions
• housing shocks

Disclosure statement

No potential conflict of interest was reported by the author.

Supplementary material

Supplemental data for this article can be accessed here.

Notes

¹ Savings rates or money market rates are used whenever deposit rates are unavailable.

² Table 2 in the online appendix presents descriptive statistics of the selected variables.

³ See Balakrishnan et al. (2011) for details on the construction of each sub-index and Soave (2020) on estimation details.

Additional information

Funding

This work was supported by the Conselho Nacional de Desenvolvimento Científico e Tecnológico.