Skopje, 24 December 2022
The National Bank held the last Research Club session for this year. Magdalena Petrovska, Elena Mucheva Mihajlovska and Artan Sulejmani presented the paper "Estimation of the credit gap using the multivariate Hodrick-Prescott filter - The case of North Macedonia".
The vice-governor, Ana Mitreska, who opened the 45th Research Club session, indicated that the topic is extremely relevant for central banks, as it is directly related to their mandate.
"The deviation of loans from their potential, or the so-called credit gap, is an important concept as it contains a myriad of information as an early warning indicator, i.e. as an indicator of the potential vulnerability of the credit market. That is why this indicator is one of those that are taken into account when determining the countercyclical capital buffers of central banks", says Mitreska.
The paper states that the relevant literature shares the opinion that the loan to GDP ratio is a good indicator of the sustainability of lending activity. A lower equilibrium level could reduce the economic growth rate, while too high levels increase the likelihood of a financial crisis. To define which level is too low or too high, we have to determine the equilibrium path of the loan to GDP ratio.
It also points out that the main methodological challenge is to set up a model that would produce the most appropriate assessment of the equilibrium level of loans and the credit gap. That is why there are several methodological approaches, with one of the advantages of the model used in the paper being its structural dimension. Structural factors are singled out from the supply and demand side, which affect the loan to GDP ratio. Consequently, the authors believe that the proposed model has an added value and can be used in policy making.
The presentation was followed by a discussion inspired by the paper and the conclusions presented. The 45th session successfully completed the Club’s activities planned for this calendar year. The next session will be held in March next year.
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