Zalduendo, JuanSugawara, Naotaka2013-09-042013-09-042013-05https://hdl.handle.net/10986/15597This paper examines why some countries experience economic recoveries without pick-up of bank credit (credit-less) and how different this recovery pattern is from the case where credit is increased as an economy recovers (credit-with). To answer these questions, the paper uses quarterly data covering 96 countries and identifies 272 recovery episodes. It finds that more than 25 percent of all recoveries are credit-less and around 45 percent of all credit-less recoveries occurred in 2009-10. It also finds that output and investment growth tends to be lower in credit-less events but, by eight quarters after the trough date, the gap between credit-less and credit-with episodes is mostly exhausted. Results of the probit estimations show that the size of the downturn and the extent of external adjustment are associated with the likelihood of credit-less recoveries. Moreover, fiscal loosening tends to be related to credit-less events while monetary easing and a country's decision to seek an International Monetary Fund-supported program reduce the probability of credit-less recoveries. Finally, the model suggests that many countries in the Europe and Central Asia region were likely to experience credit-less recoveries following the global financial crisis in 2008/09. What is more worrisome for them is the fact that they are facing another negative external shock.en-USCC BY 3.0 IGOADVANCED ECONOMIESADVANCED ECONOMYAFFILIATED ORGANIZATIONSALTERNATIVE FINANCINGARIMABANK CREDITBANKING CRISESBANKING CRISISBIASESBORROWINGBUSINESS CYCLESCAPITAL ACCOUNTCAPITAL ACCOUNTSCAPITAL ACCUMULATIONCAPITAL INFLOWSCAPITAL MARKETSCENTRAL BANKCOMMERCIAL BANKSCONSUMER PRICE INDEXCREDIT CRUNCHESCREDIT GROWTHCREDIT PERFORMANCECURRENT ACCOUNTCURRENT ACCOUNT BALANCEDEBTDEBT CRISISDEMAND FOR CREDITDEPENDENTDEVALUATIONDEVELOPMENT ECONOMICSDEVELOPMENT POLICYECONOMETRIC ANALYSISECONOMIC ACTIVITIESECONOMIC ACTIVITYECONOMIC CONDITIONSECONOMIC OUTLOOKECONOMIC PERFORMANCEECONOMIC RECESSIONEMERGING MARKET ECONOMIESEMERGING MARKETSEUROPEAN CENTRAL BANKEXCHANGE RATEEXCHANGE RATESEXPENDITUREEXPORTSEXTERNAL CREDITEXTERNAL FINANCEEXTERNAL SHOCKFEDERAL RESERVEFEDERAL RESERVE BANKFINANCIAL CRISESFINANCIAL CRISISFINANCIAL DEPTHFINANCIAL DEVELOPMENTFINANCIAL INTERMEDIARIESFINANCIAL INTERMEDIATIONFINANCIAL MARKETSFINANCIAL SECTORFINANCING CONSTRAINTFINANCING SOURCESFISCAL BALANCESFISCAL POLICIESFISCAL POLICYFLOW OF CREDITGDPGDP DEFLATORGLOBAL CAPITALGROWTH RATEHOUSEHOLD FINANCESINFLATIONINTERNATIONAL BANKINTERNATIONAL FINANCIAL STATISTICSINTERNATIONAL RESERVESINVESTMENT GROWTHINVESTMENT NEEDSJUDGELEVERAGEMACROECONOMIC POLICIESMACROECONOMIC POLICYMACROECONOMIC SHOCKSMARKET ECONOMIESMARKET VALUESMONETARY POLICIESMONETARY POLICYNEED FOR CREDITOPEN ECONOMIESPRIVATE CREDITPRODUCTION CAPACITYPRODUCTIVITY GROWTHPUBLIC DEBTREAL GDPRECESSIONRECESSIONSRECOVERY PERIODREGRESSION ANALYSISSAVINGSSYSTEMIC BANKING CRISESTOTAL FACTOR PRODUCTIVITYTRADE CREDITTROUGHWorld Bank10.1596/1813-9450-6459