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Understanding the credit cycle and business cycle dynamics in India

Author

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  • Saini, Seema
  • Ahmad, Wasim
  • Bekiros, Stelios
Abstract
This study aims to understand the dynamics of credit and business cycle interactions at the aggregated and disaggregated (sectors and industries) levels in the Indian context. We explore both parametric and non-parametric time-series approach to date the major turning points and calculate the lead-lag measures. We also test for synchronizing credit and business cycles and finding that there is a procyclicality during the crisis period. However, the analysis at sectoral and industry levels exhibit asymmetry as some sectors exhibit countercyclically. The business cycle precedes the credit cycle at the aggregated and disaggregated levels. The repo rate, broad money, real exchange rate, and industrial output significantly explain India's business-credit dynamics.

Suggested Citation

  • Saini, Seema & Ahmad, Wasim & Bekiros, Stelios, 2021. "Understanding the credit cycle and business cycle dynamics in India," International Review of Economics & Finance, Elsevier, vol. 76(C), pages 988-1006.
    • Handle: RePEc:eee:reveco:v:76:y:2021:i:c:p:988-1006
    DOI: 10.1016/j.iref.2021.08.006
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    Cited by:

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    2. Mateusz Pipień & Dobiesław Tymoczko, 2024. "Does the credit cycle exist? Policy recommendations based on empirical analyses of the Polish banking sector," Bank i Kredyt, Narodowy Bank Polski, vol. 55(1), pages 1-20.

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    More about this item

    Keywords

    Credit cycle; Business cycle; Synchronization; Band-pass filter; Markov-switching model; Sectoral business cycle;
    All these keywords.

    JEL classification:

    • E30 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - General (includes Measurement and Data)
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • G01 - Financial Economics - - General - - - Financial Crises

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