Credit growth in Latin America: financial development or credit boom?

Bank credit to the private sector as a percentage of GDP grew by 9 percent in Latin America between 2004 and 2011. In real terms, credit has grown by more than 20 percent in some countries. This study analyzes the patterns of this growth in 18 countries in the region and determines whether this growth is a sign of greater financial system deepening or whether there is a risk of a credit “boom.” Taking into account the stylized facts of credit growth in the region, the study finds that in some Latin American countries there are significant positive deviations from their long-term trend. This result suggests that there are risks associated with the recent development of the credit market in Latin America. (Audio: Department of Economic Publications)