Keywords

credit crunch, credit rationing, credit market disequilibrium model

In this paper, we estimate a credit market disequilibrium model in order to establish specific determinants of credit supply and demand and to identify credit market disequilibrium periods. The model estimation results indicate three characteristic sub-periods, differentiated by sources of bank credit activity dynamics. The first period, from 2000 to 2002, was marked by equilibrium between credit supply and demand and gradual stabilisation of global financial markets and the domestic banking sector after the crisis in the late 1990s. In the second period, from end-2002 to the middle of 2009, encouraged by strong foreign capital inflows, banks were ready to supply more credit than demanded. The third period, marked by an abrupt halt in credit activity, started with an escalation of the world financial crisis during the third quarter of 2008 and lasted until end-2009. According to the model estimation results, such movements were the consequence of a credit supply shortage, i.e. a credit crunch.