# **Figure 1.2 Coincidence between investment surges and credit booms**

_Before the global financial crisis, about 40 percent of all credit booms in EMDEs were accompanied by investment surges around the boom’s peak. Only one quarter of credit booms since 2010 have been accompanied by investment surges (and virtually none by investment booms)._

- **A. Investment surges during past booms in EMDEs**

- **B. Investment surges during recent credit booms in EMDEs**

<!-- Start of picture text --> Percent of credit booms Number of countries<br>50 30 Credit boom with investment surge<br>Investment surge Credit boom without investment surge<br>40 Investment boom 25 Investment surge<br>20<br>30<br>15<br>20 10<br>5<br>10<br>0<br>0<br>until 2007 2010 onwards 1980‐2015<br>2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015<br><!-- End of picture text --> Sources: Haver Analytics; International Financial Statistics, International Monetary Fund; Bank for International Settlements; World Development Indicators, World Bank.

Notes. Credit booms are defined as in Figure 1.1. Investment surge is defined as years when the cyclical component of the investment‐to‐GDP ratio is at least one standard deviation (1.65 for investment booms) above the HP‐filtered trend, while investment slowdown is a year when the cyclical component of the investment‐to‐GDP ratio is at least one standard deviation below the HP‐filtered trend. Data availability as in Figure 1.1.

A. Investment surges during the peak year (t=0) or the following year (t=1).

# **Figure 1.3 Output growth during credit booms and deleveraging episodes**

_In EMDEs, output on average grew above its trend by 2 percent during credit booms and fell below trend by 2 percent during deleveraging episodes. Output growth during credit booms tended to be stronger when accompanied by investment surges. During deleveraging episodes, declines were deeper when accompanied by investment slowdowns._

- **A. GDP during credit booms**

<!-- Start of picture text --> Percent deviation from trend All<br>With investment surge<br>Without investment surge<br>3 2012-2015 (countries in credit booms)<br>2<br>1<br>0<br>-1<br>-2<br>-3<br>-4<br><!-- End of picture text -->

## **B. GDP during deleveraging episodes**

<!-- Start of picture text --> All<br>With investment slowdown<br>Without investment slowdown<br><!-- End of picture text --> Sources: Bank for International Settlements; Haver Analytics; International Financial Statistics, International Monetary Fund; World Development Indicators, World Bank. Notes. Credit booms and deleveraging episodes are defined as in Figure 1.1 Investment surges and slowdowns are defined as in Figure 1.2. Data availability as in Figure 1.1.

A. Group medians for the cyclical components of GDP in percent of its trend (derived using a Hodrick‐Prescott filter) for all credit booms (in blue), credit booms with investment surge (occurred in 1 year around t=0, in red), and credit booms without investment surge (in yellow). The mean cyclical components of GDP in percent of its HP‐filtered trend for the ten countries (including Azerbaijan, Bolivia, China, Cote d’Ivoire, Kenya, Kuwait, Oman, the Philippines, Qatar, and Turkey) in credit booms in 2015 during 2012‐2015 are in light blue dashed line. B. Group medians for the cyclical components of GDP in percent of its trend (derived using a Hodrick‐Prescott filter) for all deleveraging episodes (in blue), deleveraging episodes with investment slowdown (occurred in 1 year around t=0, in red), and deleveraging episodes without investment slowdown (in orange).

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