Credit cycles in Perú

Knowing the cyclical movements of macro-financial variables, such as credit, is relevant not only for identifying whether we are facing an overheating event in the financial sector but also for proposing macroprudential measures to avoid extreme movements in the financial cycle. In this study, we focus on measuring the cyclical changes of various credit metrics, both in logarithmic terms and as ratios to GDP, as well as by credit type and currency denomination. Among the key findings, we highlight the following: (i) Credit in foreign currency exhibits at least one additional cycle compared to credit in domestic currency, underscoring the need to monitor the cyclical evolution of credit at both the aggregate level and by components (by currency and credit type). (ii) The various cyclical measures of credit do not suggest a strong dynamic correlation with the GDP cycle, which implies that a macroprudential measure based on the GDP cycle as a proxy for the credit cycle might have limited effectiveness in mitigating credit overheating events.