Skewed Credit and Growth Dynamics after the Global Financial Crisis

A large empirical literature finds that financial development is beneficial for economic growth, although some recent evidence suggests otherwise. The paper contributes to the finance–growth literature by examining the role of credit growth skewness and long-run growth. Earlier literature found that credit growth skewness is negatively associated with economic growth. It revisits this relationship using a large and recent panel dataset that encompasses Organisation for Economic Co-operation and Development economies and the impact of the global financial crisis. While the results reconfirm an association between credit skewness and growth, the relationship is more nuanced than previously thought. It finds that the beneficial effects from lower skewness—systemic financial risks—were evident only prior to 2000. The findings help explain why boom–bust dynamics were positively associated with economic growth in emerging markets in the past and why the growth of advanced economies has been sluggish since the global financial crisis.