Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/189849
Authors: 
Kocsis, Levente
Sallay, Miklós
Year of Publication: 
2018
Series/Report no.: 
MNB Occasional Papers 136
Abstract: 
Periods of excessive credit growth can imply emergence of systemic financial stress which may result in financial crisis causing severe losses in the real economy. The base indicators of overheatedness in the credit markets are the expansion of the credit-to-GDP ratio and its deviation from its long-term trend, the credit-to-GDP gap. When calculating the latter, the major methodological challenge is to develop a model capable of executing the most reliable trend-cycle decomposition. This study presents a multivariate Hodrick-Prescott approach for the decomposition process, which defines the cycle with the inclusion of explanatory variables chosen by considering both statistical and economic selection criteria, successfully solving the problems raised by previous Hungarian research. The model also plays a role in the Hungarian macroprudential policy as in the future it will serve a basis for the calculation of the country specific, additional credit-to-GDP gap: one of the main quantitative factors influencing decisions regarding the countercyclical capital buffer (CCyB).
Subjects: 
excessive credit growth
financial stability
credit-to-GDP gap
multivariate HP filter
countercyclical capital buffer
JEL: 
E44
G01
G17
G18
G21
Document Type: 
Working Paper

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