World Economics - Insight , Analysis and Data

World Economics - Measuring Global Economic Activity and GDP
Further Fallout from the Global Financial Crisis
Adolfo Barajas, Ralph Chami, Raphael Espinoza and Heiko Hesse, World Economics, June 2011
We examine the recent credit slowdown in emerging markets from three analytical angles. First, we find that, similar to past history, a credit boom preceded the current slowdown in many emerging markets, and argue that, going forward, a protracted period of sluggish growth is likely. Second, we focus on a relatively understudied region – the Middle East and North Africa (MENA) – using a more detailed banking data. We uncover a key role played by bank funding, in particular, deposit growth and external borrowing slowed considerably, despite expansionary monetary policy. Finally, we show that bank-level fundamentals – capitalisation and loan quality – helped to explain differences in credit growth across banks and countries.

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