Discussion Paper Details

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Title: Creditless Recoveries

Author(s): Abdul Abiad, Giovanni DellAriccia and Grace Li

Publication Date: March 2011

Keyword(s): credit crunch, Credit cycles, financial crises and financial dependence

Programme Area(s): Financial Economics and International Macroeconomics

Abstract: Recoveries that occur in the absence of credit growth are often dubbed miracles and named after mythical creatures. Yet these are not rare animals, and are not always miracles. About one out of five recoveries is "creditless," and average growth during these episodes is about a third lower than during "normal" recoveries. Aggregate and sectoral data suggest that impaired financial intermediation is the culprit. Creditless recoveries are more common after banking crises and credit booms. Furthermore, sectors more dependent on external finance grow relatively less and more financially dependent activities (such as investment) are curtailed more during creditless recoveries.

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Bibliographic Reference

Abiad, A, DellAriccia, G and Li, G. 2011. 'Creditless Recoveries'. London, Centre for Economic Policy Research.