Credit-to-GDP ratios – non-linear trends and persistence: evidence from 44 OECD economies

Abstract

Purpose

In particular, in this article, the authors investigate the degree of persistence in the credit-to-gross domestic product (GDP) ratio in 44 Organisation for Economic Co-operation and Development (OECD) economies in the context of nonlinear deterministic trends.

Design/methodology/approach

The authors use Chebyshev's polynomials in time, which allow us to model changes in the data in a smoother way than by structural breaks.

Findings

This study’s results indicate that approximately one-quarter of the series display non-linear structures, and only Argentina displays a mean reverting pattern.

Research limitations/implications

Policy implications of the results obtained are discussed at the end of the manuscript.

Originality/value

The authors use an approach developed that allows for non-linear trends based on Chebyshev polynomials in time, with the residuals being fractionally integrated or integrated of order d, where d can be any real value.

Citation

Cuestas, J.C., Gil-Alana, L.A. and Malmierca, M. (2023), "Credit-to-GDP ratios – non-linear trends and persistence: evidence from 44 OECD economies", Journal of Economic Studies, Vol. 50 No. 3, pp. 448-463. https://doi.org/10.1108/JES-12-2021-0637