Impact of domestic credits on the current account balance: A panel ARDL analysis for 15 OECD countries

Abstract

A very fast credit growth that is denominated as a credit boom not only contributes to financial and economic growth, but also can have negative effects on the current account balance and can increase the probability of a financial crisis stemming from the current account deficit. This study aims to investigate whether domestic credits affect the current account balance. For this purpose, the panel data set of 15 OECD countries was used for the period 1986-2010. The results obtained from the panel ARDL analysis prove that domestic credits have a negative impact on the current account balance, as was expected. © Ekrem Erdem, Gulbahar Ucler, Umit Bulut, 2014.