Private credit growth

문서에서 BIS Working Papers No 553 (페이지 28-36)

Here we consider the strength of the credit cycle. Graph 2 shows that the cumulative fiscal multiplier is larger when credit growth is weak.

Graph 14 shows that a key difference between the weak and strong credit states is the behaviour of private consumption. In the weak credit state, the negative effect of consolidation on private consumption is larger and more persistent: from year three onwards, it contributes around 0.5 percentage points out of the 1% fall in output. In contrast, private investment (not shown here) does not seem to be much different in the two states, while public investment is marginally lower. At the same time, the nominal exchange rate does not depreciate and there is less offset from the trade balance. The adverse effect on employment is also more pronounced in the weak state. This pattern of behaviour seems consistent with the smaller ability of consumers to smooth consumption in the face of falling income and rising unemployment in the weak credit state. This stands in contrast with the opposite case of strong credit growth. It is also worth stressing that, while the output loss tends to persist, employment shows signs of a partial recovery after year three.

Finally, another difference is that there is somewhat less fiscal tightening following the initial consolidation shock, reflecting the larger negative impact on output in the weak credit state. Overall, the fiscal position improves but by less than average.

Current account Graph 13

GDP Private consumption Public consumption Public investment

Current account balance NEER Real wage Inflation

Note: Response to a shock of 1 percentage point of GDP to the cyclically adjusted primary balance (CAPB) over h years. The dotted lines indicate 90% confidence bands. The grey area corresponds to the 90% confidence band in the linear (state-invariant) model.

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6. Conclusion

In this paper, we have examined the short-term effects on output and employment of fiscal consolidation episodes that took place in advanced economies in the three decades prior to the global financial crisis. Our main finding is that estimates of fiscal multipliers are generally less than unity, even in states of the world that raises their estimated size. These states include a negative output gap and tight monetary policy. Therefore, contrary to the finding of some of the literature on the state-dependency of the fiscal multipliers, we do not find evidence of large output costs from fiscal consolidation when the output gap is negative. In addition, we find that multipliers are generally lower than average when public debt is high or when countries face a current account deficit, consistent with the notion that fiscal consolidation may help improve broad financial conditions, competitiveness and private agents’ confidence. A state in which the costs of fiscal consolidation are larger and more persistent than average is when private credit growth is weak. But, even in this case, point estimates are one or less at all horizons.

Can we draw the conclusion from these findings that fiscal multipliers are generally larger in the aftermath of the global financial crisis? One possible conclusion is no. Several countries face large and rising public debt, in some cases

Weak vs strong credit growth Graph 14

GDP Private consumption Trade balance

NEER Employment Cyclically adjusted pri. bal.

Note: Response to a shock of 1 percentage point of GDP to the cyclically adjusted primary balance (CAPB) over h years. The dotted lines indicate 90% confidence bands. The grey area corresponds to the 90% confidence band in the linear (state-invariant) model.

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accompanied by a higher perceived sovereign risk. In this case, the costs of fiscal consolidation should be smaller. Furthermore, some countries experience large current account deficits. In this case, a successful fiscal consolidation should help rebalance demand and improve competitiveness. On the other hand, our findings indicate that weak private credit growth may be associated with larger multipliers than average. This result naturally suggests the potential relevance of accompanying fiscal consolidation measures with interventions aimed at improving the functioning of credit markets. Even if multipliers are larger than average in the aftermath of the global financial crisis, our evidence nonetheless suggests that they are not necessarily, or everywhere, larger than one.

Past fiscal consolidation episodes may, however, not be fully representative of the circumstances faced by several economies in the current post-crisis environment. In particular, a characteristic of recent and ongoing consolidation is that it is taking place more or less at the same time in a large number of countries.

This greater simultaneity may act to raise the costs of fiscal consolidation compared to past estimates, given the importance of net trade in offsetting the costs of consolidation. Whether this is really the case requires further careful research. At a minimum, however, our findings should raise doubts about studies claiming that past historical evidence imply large multipliers post-crisis. Moreover, if multipliers are really larger than one, it may be because of different drivers than those highlighted by the recent literature on the state-dependency of fiscal multipliers.

IV first-stage regression Annex Table A1

Estimate Std. error t-value Pr(>|t|)

total_1 0.668*** 0.083 8.068 0.000

hply -0.138*** 0.018 -7.495 0.000

dly 0.141*** 0.038 3.671 0.000

ldly 0.102** 0.042 2.409 0.016

dlcpi 0.086 0.061 1.418 0.157

ldlcpi 0.008 0.065 0.127 0.899

polRt -0.032 0.021 -1.489 0.137

lpolRt -0.034 0.021 -1.621 0.106

dlreer 0.009 0.010 0.915 0.361

ldlreer 0.006 0.010 0.626 0.532

debtGross 0.009*** 0.002 4.048 0.000

cay -0.004 0.030 -0.149 0.882

treatment 0.218** 0.095 2.301 0.022

dbalp 0.029 0.046 0.633 0.527

tradewgtd_gdpgrowth_scaled -0.396*** 0.142 -2.792 0.005

R-squared 0.278

Adj. R-Squared 0.258

F-statistic 10.600

p-value 0.000

Partial F-test

Model Residual Df Df F Pr(>F)

1 412

2 413 -1 65.095 0.000 ***

Note: total_1: the narrative shock (period t); hply: HP filtered output gap (period t-1); dly: log change in real GDP (period t-1); ldly: lagged log change in real GDP (ie growth in period t-2); dlcpi: change in log(CPI) (t-1); ldlcpi: lagged change in log(CPI) (ie inflation in period t-2);

polRt: policy rate in period t-1; lpolRt: lagged policy rate (ie in t-2); dlreer: change in log real exchange rate (t-1); ldlreer: lagged change in log real exchange rate (ie in t-2); debtGross: gross financial liabilities as a share of GDP in % (t-1); cay: current account balance as a share of GDP in % (t-1); treatment: if a narrative shock occurred in period t-1; dbalp: change in the primary balance (t-1);

tradewtgd_gdp_growthscaled: trade weighted GDP growth t-1. Partial F-test based on Staiger and Stock (1997).

Data sources Annex Table A2

Description Unit Source

OECD FISCAL DATA (refers to general government sector)

Total receipts, tax and non-tax % of GDP OECD

Total outlays / disbursements / expenses % of GDP OECD

Total disbursements, underlying bln local currency OECD

Financial balance / net lending % of GDP OECD

Underlying balances % of potential GDP OECD

Primary balances % of GDP OECD

Underlying primary balances % of GDP OECD

Gross financial liabilities % of GDP OECD

OTHER OECD VARIABLES

Potential output, value bln local currency OECD

Potential output, volume bln local currency OECD

Nominal GDP bln local currency OECD

Real GDP bln local currency OECD

GDP deflator Index, 2010=100 OECD

Nominal fixed investment bln local currency OECD

Nominal government fixed investment bln local currency OECD

Nominal private consumption bln local currency OECD

Nominal government consumption bln local currency OECD

Nominal exports of goods and services,

national accts basis bln local currency OECD

Nominal imports of goods and services,

national accts basis bln local currency OECD

Current account balance USD bln OECD

Unemployment rate % OECD

Labour force participation rate, age 15 and older % OECD Wage rate, total economy

(figures look like annual wages per person) In local currency OECD

Total employment millions persons OECD

Data from other sources

Consumer price index Index, 2010=100 BIS

Effective exch rates, real (CPI-based), narrow basket Index, 2010=100 BIS

Exch rate, USD per national

currency BIS

Debt of/credit to the private sector bln local currency BIS

Consensus forecast in Jan for inflation the following year annual CPI inflation, % Consensus Economics

Bilateral import and export shares % IMF DOTS

Policy rates Percent BIS

Ten-year bond yields Percent BIS

Narrative fiscal shocks (Devries et al) % of GDP IMF

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문서에서 BIS Working Papers No 553 (페이지 28-36)