Recovery from crises and lending

During the recovery from the recent crisis, the general role of lending in economic growth, and particularly in the recovery from financial crises, has become an important issue. In this paper, we review the major differences between creditless recovery episodes and recoveries accompanied by growth of credit. Based on the literature, we find that creditless recoveries are relatively frequent phenomena: a quarter or one-fifth of all real economy recoveries take place without the growth of credit. The rate of economic growth is permanently lower during creditless recoveries than in episodes accompanied by credit expansion. Thus, lending activity of the financial intermediary system is usually necessary for fast recovery. When analysing the recovery from the current crisis, we find that a number of factors exist that predispose to creditless recovery. The current growth, the rate of which is lower than before the crisis, is taking place – both in the Member States of the European Union and in Hungary – with a decrease or stagnation of the credit stock. In the medium and long term, it is essential for the sustained growth of the real economy that loans granted by the financial intermediary system once again start to increase.