Key takeaways
- Since interest rates declined in the early 2000s, credit expanded strongly and its allocation changed significantly in emerging market economies (EMEs).
- Being largely spared by the Great Financial Crisis (GFC), EMEs have seen credit increasingly flowing to the construction and real estate sectors at the expense of manufacturing. Due to lower productivity growth in the housing sector, this shift has coincided with decreasing growth rates.
- Strong credit growth concentrated in a few sectors has also been associated with greater dispersion of productivity across firms, suggesting less efficient resource allocation.
The views expressed in this publication are those of the authors and do not necessarily reflect the views of the BIS or its member central banks.
