NBER Publications by Oscar Landerretche

Recent theories of crisis put lending booms at the root of financial collapses. Yet lending booms may be a natural consequence of economic development and fluctuations. So are lending booms dangerous? In this paper, we investigate empirically this question using a broad sample of lending boom episodes over 40 years, with a special eye for Latin America. Our results indicate that (1) lending booms are often associated with (i) a domestic investment boom; (ii) an increase in domestic interest rates; (iii) a worsening of the current account; (iv) a declines in reserves; (v) a real appreciation; (vi) a decline in output growth, (2) 'typical' lending booms do not increase substantially the vulnerability of the banking sector or the balance of payments. Comparing Latin America and the rest o...