Score contribution per author:
α: calibrated so average coauthorship-adjusted count equals average raw count
In this article, we analyse the asymmetric causality linkages between credit growth and output growth during banking crises. We employ a recently developed procedure, based on a bivariate Markov switching model, to test the hypotheses of independence, causality and asymmetric causality between credit and output. Using a sample of 103 banking crises around the world, we find that neither credit nor output takes precedence as a variable in calm and crisis periods, although there is evidence of instantaneous interdependence between the banking and real sector during crises. The results suggest that shocks propagate mostly within a year between the banking sector and the real economy. The linear link between credit growth and output growth is also regime dependent.