From Credit Growth to Credit Crunch: Analysis of policy responses to credit development in Central and Eastern Europe

This publication analyzes policy measures taken to curb the private sector credit growth in the period 2003-2008. The work evaluates the excessiveness of the credit development in Central and Eastern Europe (CEE) with respect to macroeconomic fundamentals. Based on the results, menu of policy options to counter adverse effects of the credit boom is reviewed. The analysis is based on a survey performed on eleven central banks in the region. The findings reveal high intensity of policy interventions. Deriving from the country experiences, we argue that in order to eliminate adverse impacts, policy measures should include combination of monetary and macroprudential tools with special emphasis on domestic environment and role of foreign banks in the region.