Business cycle in Czechoslovakia under central planning: Were credit shocks causing it?

This paper examines credit origins of the business cycle in the former Czechoslovakia. Industrial production is found to be cointegrated with various measures of bank credit during 1976-1990. Noninvestment credits are shown to be Granger-causing industrial production and a feedback relation exists between investment credits and industrial production. Although the impact of credit supply shocks on industrial production has been changing, production decline (growth) seems to follow credit tightening (loosening). However, the paper confirms that credit shocks were only a minor part of the output decline in 1989-1990. (C) 1998 Academic Press.