The Relationship between Monetary Policy and Financial Stability in the Context of the Recent Global Crisis

Author:Angela Roman - Alina Camelia Sargu
Position:Al. I. Cuza' University of Iasi, Romania - 'Al. I. Cuza' University of Iasi, Romania
Pages:572-581
SUMMARY

In recent years, pre-crisis years, the loans granted to household experienced an extremely accelerated dynamic in most new EU member states. Such a development has led to an increase in the degree of bank indebtedness of the households and to considerable macroeconomic and financial imbalances. The current crisis has stopped the rapid growth of the loans granted to households and has led to... (see full summary)

 
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European Integration - Realities and Perspectives 2012
572
The Relationship between Monetary Policy and
Financial Stability in the Context of the Recent Global Crisis
Angela Roman
1
, Alina Camelia Sargu
2
Abstract: In recent years, pre-crisis years, the loans granted to household e xperienced an extremely
accelerated dynamic in most new EU member states. Such a development has led to an increase i n the degree
of bank indebtedness of the households and to considerable macroeconomic and financial imbalances. The
current crisis has stopped the rapid growth of the loans granted to households and has led to worsening
financial situation of households and a significant deterioration of the soundness bank indicators. In this
context, the purpose of our paper is a comparative analysis of the main characteristics of the evolution of
bank loans granted to household in the new EU member s tates (Bulgaria, Czech Republic, Estonia, Hungary,
Latvia, Lithuania, Poland and Romania), of the vulnerabilities caused by the fast increase of the bank
indebtedness of the households, and the implications of the current crisis..
Keywords: Credit growth; New EU member countries; loans to households; vulnerabilities; global economic
crisis
1 Introduction
Before the beginning of the current global crisis, most of the new EU member states that we included
in our research (Bulgaria, Czech Republic, Estonia, Hungary, Latvia, Lithuania, Poland, Romania)
have registered a rapid growth of the bank loans, especially of those granted to households. Such
evolution was generally considered a progress in terms of making up for the structural and
convergence gaps; however, on the other hand, this led to the occurrence of considerable
macroeconomic and financial vulnerabilities.
The current global economic crisis had an extremely negative impact on households in most of the
new EU member states. One of the main channels by which the current crisis worsened the economic
and financial status of numerous households is that of the financial markets, due to the limited access
to bank loans and to assets value decrease, especially real estate assets.
Our paper it is structured in five parts: the first part includes introductory remarks on the importance
and relevance of the approached topic; the second part it is dedicated to the literature review; the third
part highlights the characteristics of the financial intermediation process in the new EU member states
considered by our research, especially from the point of view of loans granted to households; the
fourth part of the paper reflects the effects of the rapid growth of the loans granted to households,
whereas the fifth part emphasizes the current crisis effects and the challenges that the decision makers
have to face in this context. The paper ends with several conclusions.
The research methodology used in our research starts with the literature review, in order to point out
the importance of the topic approached by our paper. The analysis conducted in this paper is based on
official statistics from the ECB, other central banks, the IMF, and different reports and researches.
1
“Al. I. Cuza” University of Iasi, Romania, Address: 11 Carol I Blvd, Iasi 700506, Iasi, Romania, Tel.:+40 (232) 201000.
Fax:+40 (232) 201201, Corresponding author: aboariu@uaic.ro.
2
“Al. I. Cuza” University of Iasi, Romania, Address: 11 Carol I Blvd, Iasi 700506, Iasi, Romania, Tel.:+40 (232) 201000.
Fax:+40 (232) 201201, e-mail: s_alina_camelia@yahoo.com.

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