Theoretical and Applied Economics
No. 3 / 2013 (580)
The lending channel and budget balance: empirical evidences from Central and Eastern European economies
The Bucharest University of Economic Studies
Abstract. The study aims to deepen the analysis on the indirect dependence of government budget balance on private sector credit flow in the countries of Central and Eastern Europe. The added value of this approach consists of two elements. First, the analysis suggests developing the traditional analytical framework of assessing risks to public finance stability by including second round effects of negative fiscal impulses on credit to private sector during recession periods. Second, the study provides empirical evidence on the importance of economic growth transmission channel for the impact of credit accelerator effects on primary deficit. At the same time, nonperforming loans channel proved to be insignificant, especially in relation to the persistency of last year’s budget deficit and the effects of budget allocations pro-cyclicality. However, loan portfolio quality seems to be more relevant in the case of public debt service, through its influence on the evolution of the yield on long-term government securities that is closely related to sovereign risk premium. Nevertheless, strengthening the financial safety net by the introduction of resolution funds will most probably break the link investors saw between credit portfolio quality and the impending increase in budget spending. This expected development across not only CEE countries, but at the EU level also, will facilitate the isolation of sovereign risk premium from non-performing loans’ dynamics.
Keywords: credit flow; primary balance; debt service; GDP growth; nonperforming loans; CEE economies; panel regressions.
Contents
- Sustainability of the public debt
and the financial crisis
Aura Gabriela SOCOL
- The lending channel and budget balance:
empirical evidences
from Central and Eastern European economies
Bogdan-Gabriel MOINESCU
- Heterogeneous capital and consumption goods
in a structurally generalized Uzawa’s model
Wei-Bin ZHANG
- Differences between the nominal values
of the gross domestic product and the provisional
and semi-final variant
Vergil VOINEAGU
- Forecasting the variance and return of Mexican
financial series with symmetric GARCH models
Fátima Irina VILLALBA PADILLA
Miguel FLORES-ORTEGA
- Meanings and spreading patterns of the “positive”
concept in economic thought
Angela ROGOJANU
George ŞERBAN-OPRESCU
- Implications of the single supervisory mechanism
on ECB's functions and on credit institutions' activity
Teodora Cristina BARBU
Iustina Alina BOITAN
- Analysing movements in investor’s risk aversion
using the Heston volatility model
Alexie ALUPOAIEI
Andrei HREBENCIUC
Ana-Maria SĂNDICĂ
- The labour market in the post-crisis economy:
the case of Spain
Mirela Ionela ACELEANU
- Liberalisation and regulation in the financial crisis –
is behavioural economics a solution?
Liviu-George MAHA
Paula-Elena DIACON
Gabriel-Andrei DONICI