No. 1266 - Determinants of the credit cycle: a flow analysis of the extensive margin

by Vincenzo Cuciniello and Nicola di Iasio
March 2020
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A methodology has been developed to decompose fluctuations in bank credit into the contribution of new debtors and that of existing debtors. The change in the number of debtors is also decomposed into inflows and outflows across three statuses in the reference month: debtors; loan applicants; neither debtors nor applicants. For this analysis, the loan level data of households and businesses from 1997 to 2019 were used.

The expansive phases of credit are mainly linked to the increase in the number of new households and businesses that obtain a loan. The inflow of new debtors is highly procyclical, anticipates the business cycle and accounts for more than two thirds of the change in the number of debtors. The volatility of new borrowers is due to the change in the probability of obtaining a loan, rather than to the change in the total number of applicants.

Forthcoming in: Journal of Money, Credit and Banking.

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  1. 18 March 2020
    No. 1266 - Determinants of the credit cycle: a flow analysis of the extensive margin
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