Quick one today on credit to GDP gaps. Data is sourced from the Bank for International Settlements and is produced in order to inform central banking of the build up of economy wide risk and inform the requirements for counter cyclical capital buffers.
The credit-to-GDP gap is defined as the difference between the credit-to-GDP ratio and its long-run trend. The credit-to-GDP ratio as published in the BIS database of total credit to the private non-financial sector, capturing total borrowing from all domestic and foreign sources, is used as input data.
Of interest are the large and sychronised increases in this measure in 2007. This has not been matched recently.
On this measure at least, system wide risks are lower than previous.