This thesis analyzes policy measures taken to curb the private sector credit growth in the period 2003-08. The thesis evaluates the excessiveness of the credit development in the 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 intervention: altogether 82 measures were taken in CEE in the period. Deriving from the country experiences, the thesis argues that in order to eliminate adverse impacts, policy measures should include combination of monetary and prudential tools with special emphasis on domestic environment and role of foreign banks in the CEE region.

This thesis investigates monetary transmission asymmetries in CEE region. The first part addresses the role of credit growth in monetary transmission in the Czech Republic. Employing Logistic Smooth Transition Vector Autoregression model over the 1998:M1-2012:M3 period, we find that high credit growth dampens the effectiveness of monetary policy. No asymmetries in relative effects of contractionary and expansionary monetary policy shocks have been documented. In the second part, we apply the variation of Panel VAR to examine the role of financial structure in monetary transmission. The analysis is conducted on a sample of eight CEE states, encompassing the 1999:Q1-2009:Q4 period. Higher credit dependence is found to enhance the interest rate pass-through. However, cross-country asymmetries vanish when the credit dependence is interacted with the measure of banking sector competition. The ultimate role of financial structure in output and price fluctuations is indeterminable.

In this work, I analyse inappropriateness of single monetary policy in the euro area and its impact on credit growth for the oldest twelve euro members and a time period spanning 1999Q1-2013Q3. The inappropriateness is expressed by deviations of actual interest rate from Taylor rule prescriptions. The obtained results are in line with a majority of existing literature since they show that the ECB's single interest rate was the least suitable for the so called PIIGS countries prior to the recent economic crisis. The impact of the deviations on credit growth is estimated econometrically by dynamic panel data estimation. The findings confirm my hypothesis that the deviations from the Taylor rule have a significant positive effect on credits volume, i.e. the higher is the Taylor rule prescription above the actual rate, the higher is the credit growth.

This thesis focuses on the development of credit to the private sector in the Central and Eastern European (CEE) countries. Although the speed of credit growth in these countries has recently slowed down as the consequence of the global financial crisis, the overall increase in credit to the private sector over the past decades has been immense. As a result, the thesis examines whether this substantial increase in credit is linked to the convergence of the CEE countries towards the equilibrium or whether it represents an excessive credit growth that could threaten the macroeconomic and financial stability in these countries. We estimate the equilibrium credit levels for 11 transition countries by applying a dynamic panel data model. Since in-sample approach may bias the estimation results we perform the estimates out-of-sample using a panel of selected developed EU countries as a benchmark. The difference between the actual and estimated credit-to-GDP ratios serves as a measure of private credit excessiveness. The results indicate a slightly excessive or close to the equilibrium credit-to-GDP ratios in Bulgaria, Estonia, and Latvia prior to the financial crisis. With regard to the significant decline in GDP during the crisis this measure of credit excessiveness in these countries have further increased.

After the recent world financial crisis, macroprudential policy tools have started to play an important role in maintaining financial stability. In many countries, the tools have been extensively used only in recent years and their effectiveness is often difficult to assess. Using an index as a proxy for policy tools is one of ways to measure their impact. In this thesis, a new index capturing, in contrast with other studies, also an intensity factor, is constructed. Results are mostly in accordance with economic intuition and existing studies and suggest that indices constructed in an equivalent way can help to understand the impact of policies on changes in housing prices and credit volumes. JEL Classification F12, F21, F23, H25, H71, H87 Keywords macroprudential policy, systemic risk, house prices growth, credit growth Author's e-mail Lucie.Wdowyczynova@hotmail.com Supervisor's e-mail Simona.Malovana@gmail.com

Bien que les pays de l’Europe Centrale et Orientale montrent de plus en plus des similitudes structurelles avec des pays développés, leurs économies restent vulnérables aux facteurs d’instabilité financière caractéristiques aux pays en développement. La présence de ces vulnérabilités a conduit aux débats sur les avantages de l’adhésion rapide à l’Union Economique et Monétaire (UEM). Traditionnellement, selon de la Théorie des Zones Monétaires Optimales, l’adoption de l’euro peut être bénéfique éliminant le risque du taux de change, donnant un meilleur accès au financement externe et atténuant l’impact des crises financières. De l’autre côté, l’abandon de l’autonomie de la politique monétaire et du taux de change prive les autorités nationales d’une marge de manœuvre dans le cas où le pays soit touché par les chocs asymétriques (d’offre) ou sa réponse aux chocs symétriques diverge de celle de la zone monétaire. L’objective de cette thèse est de déterminer les vulnérabilités financières des PECO et le degré d’asymétrie de leurs économies afin de participer aux débats sur la stratégie d’adhésion à l’euro. / Although the Central and Eastern European countries show in many respects increasing similarities to developed economies they still present some characteristics pointing to potential sources of increased financial vulnerability. The presence of these vulnerabilities has raised the discussion about whether early euro adoption could represent an effective policy remedy for the CEECs’ economies. Traditionally, in the sense of the Optimum Currency Area (OCA) Theory, the arguments vary between two points of view. On the one side, the EMU adhesion would have a beneficial effect eliminating exchange rate risks, giving a better access to external financing and attenuating the impact of financial crises. On the other side, EMU membership may not protect these countries against asymmetric shocks. In fact, in the case of (real) asymmetric shocks or asymmetric response to common (real and nominal) shocks, the output and employment costs of the euro adoption could be very high. The objective of this dissertation is to study these issues, focusing first on potential source of financial vulnerabilities, and then to assess the degree of the CEECs’ shock asymmetry to participate in debates on the euro adoption.

The worldwide economic downturn and recession in the second half of 2008 were mainly the result of the crises that influenced the world‟s financial markets. After the financial crisis, the extended period of rapid credit growth that was driven by asset price increases, especially property prices, came to an end. This identified two problems central to the theme of this study. The first problem was illustrated through the recent crisis, which showed that problems in the financial sector have a potentially destabilising effect on the economy, to such an extent that they also affect the real economy. The second problem highlighted by the recent financial crisis pertains to the current macroeconomic framework, which indicates policy failure to detect and deal with financial sector instabilities. The objective of this study was to develop a framework in which the influence that rapidly growing credit and asset prices have on financial stability could be determined. Two distinct empirical models were estimated in order to reach the main objective of this study. The first model established the influence that asset prices and credit growth have on the real economy. It concluded that a long-run relationship exists between inflation, real GDP, credit extended to the private sector, house prices and share prices. A bi-directional relationship was found between house and share price, which indicates the interdependence of asset prices in SA. The transmission channels assume that credit is influenced by interest rates, but the results also found that interest rates are largely influenced by credit. The second model determined the influence of asset prices and credit on financial stability. A significant long-run relationship was found between financial stability, share and house prices, and between share prices, credit and financial stability. It was found that credit and share prices can be used to signal financial instability, and share prices can help to determine future credit extended to the private sector. In addition, the empirical analysis indicated that a credit market squeeze will be experienced after a decrease in financial stability. Lastly, credit extended will increase as a result of shock to house and share prices and financial stability will decrease when there is a shock to share and house prices. / MCom (Economics), North-West University, Potchefstroom Campus, 2013

The worldwide economic downturn and recession in the second half of 2008 were mainly the result of the crises that influenced the world‟s financial markets. After the financial crisis, the extended period of rapid credit growth that was driven by asset price increases, especially property prices, came to an end. This identified two problems central to the theme of this study. The first problem was illustrated through the recent crisis, which showed that problems in the financial sector have a potentially destabilising effect on the economy, to such an extent that they also affect the real economy. The second problem highlighted by the recent financial crisis pertains to the current macroeconomic framework, which indicates policy failure to detect and deal with financial sector instabilities. The objective of this study was to develop a framework in which the influence that rapidly growing credit and asset prices have on financial stability could be determined. Two distinct empirical models were estimated in order to reach the main objective of this study. The first model established the influence that asset prices and credit growth have on the real economy. It concluded that a long-run relationship exists between inflation, real GDP, credit extended to the private sector, house prices and share prices. A bi-directional relationship was found between house and share price, which indicates the interdependence of asset prices in SA. The transmission channels assume that credit is influenced by interest rates, but the results also found that interest rates are largely influenced by credit. The second model determined the influence of asset prices and credit on financial stability. A significant long-run relationship was found between financial stability, share and house prices, and between share prices, credit and financial stability. It was found that credit and share prices can be used to signal financial instability, and share prices can help to determine future credit extended to the private sector. In addition, the empirical analysis indicated that a credit market squeeze will be experienced after a decrease in financial stability. Lastly, credit extended will increase as a result of shock to house and share prices and financial stability will decrease when there is a shock to share and house prices. / MCom (Economics), North-West University, Potchefstroom Campus, 2013

An increasing trend of using macroprudential instrument, caps on loan-to-value (LTV) ratio, requires a full understanding of how the instrument works in practice. As the empirical research is still scant, this thesis attempts to contribute with a new evidence on LTV effectiveness in context of six developed economies, namely Netherlands, Sweden, Ireland, Hungary, Latvia and Lithuania. To achieve this objective we analyse the impact of caps on LTV on credit growth, mortgage credit-to- GDP ratio and price growth. LTV limits are not a harmonised measure and its national-level implementation includes numerous specificities that can hinder cross-country comparisons. As a result, this thesis proposes a construction of LTV index reflecting specific aspects of the measure. Using the LTV Index we confirmed a slowdown of credit, mortgage and price growth. JEL Classification E44, E51, E52, E58, G21 Key words caps on loan-to-value ratio, maximum LTV ratio, macroprudential policy, credit-related instruments, LTV Index, house price growth, credit growth, financial stability.