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Domestic Credit Growth and International Capital Flows

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  • Philip R. Lane
  • Peter McQuade

Abstract

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.

Suggested Citation

  • Philip R. Lane & Peter McQuade, 2014. "Domestic Credit Growth and International Capital Flows," Scandinavian Journal of Economics, Wiley Blackwell, vol. 116(1), pages 218-252, January.
    • Handle: RePEc:bla:scandj:v:116:y:2014:i:1:p:218-252
    DOI: 10.1111/sjoe.12038
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    More about this item

    JEL classification:

    • E51 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Money Supply; Credit; Money Multipliers
    • F32 - International Economics - - International Finance - - - Current Account Adjustment; Short-term Capital Movements

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