What is the Credit to GDP Gap?
By Balaji
Updated on: February 24th, 2023
The Credit-to-GDP gap is the difference between the credit-to-GDP ratio and its long-term trend. Lowe and Borio were the first to describe the feature as an early warning indicator (EWI) for banking crises. The credit-to-GDP ratio has proven useful as an indicator of financial fragility.
Table of content
-
1. Credit to GDP Gap
-
2. What is the Credit to GDP Gap?
Credit to GDP Gap
It has received attention from both practitioners and academics. The criticism concerns the following points.
- The credit gap is not the best EWI for banking crises, especially in emerging nations.
- In the credit gap, there are measuring issues.
- The credit gap is not a useful reserve guide since it may lead to decisions contrary to the CCB’s goal.
A greater loan-to-GDP ratio demonstrates the banking sector’s aggressive and active participation in the real economy. A lower score, on the other hand, suggests the need for additional formal credit.
Summary:
What is the Credit to GDP Gap?
The credit-to-GDP gap is the discrepancy between the long-term trend and the credit-to-GDP ratio. Lowe and Borio were the first to document its features, which are a helpful early warning indicator (EWI) for banking crises.
Related Questions:
- Who Runs the Union Territory?
- What were the Main Changes Brought about by the Bolsheviks Immediately afte . . .
- Who can File Habeas Corpus?
- In Thermal Power Plants, the Function of Economizer is to?
- Name the Smallest Ocean in the World
- Which Gas is the Main Pollutant Responsible for Global Warming?
- What is the Chemical Formula of Rust?
