European Economy. Occasional Papers
Directorate-General for Economic and Financial Affairs
What do the sources and uses of funds tell us about credit growth in Central and Eastern Europe?(549 kB)
(European Economy. Occasional Papers. 26. November 2006.
Brussels. 67pp. Tab. Free.)
KC-AH-06-026-EN-C ISBN: 92-79-01353-X ISSN: 1725-3209
This study sheds light on the high credit growth rates to the private sector in Central and Eastern Europe by analysing the anatomy of credit growth and the sources and uses of funds. Rather than focusing on mere growth rates, it emphasises the role of resource allocation as part of a more sophisticated understanding of credit growth. The findings are that countries with high credit growth have experienced large current account deficits, but concerns are partly alleviated by high productivity growth in the region. This is suggestive of the fact that high credit growth can be conducive to real economic convergence if channelled to the productive sector.