Working Papers present research work by both Danmarks Nationalbank’s employees and our partners. Working Papers are primarily targeted at professionals and people with an interest in central banking research as well as economics and finance in a broader sense.

Financial stability and financial risks

Financial Liberalisation and Credit Dynamics in Denmark in the Post-World War II Period.

The paper constructs annual time series for credit to Danish residents by sector and industry 1951-2005 and explores the trends and cycles in credit during the past five decades. There seems to have been a structural shift in the relationship between growth in real credit and economic activity around 1980. In the post-1980 period characterised by increased influence from market forces due to financial liberalisation and internationalisation the swings in real credit growth have been very large relative to the economic growth compared to the pre-1980 period where credit rationing and exchange controls served as important economic-policy instruments. There seems also to have been a shift over time in the short-term cyclical behaviour of commercial credit to the various industries. Real credit were contemporaneous with private sector real GDP in the pre-1980 period but has lagged the business cycle with one year in the post-1980 period. This might reflect the more restricted access to credit in the pre-1980 period. Another possible explanation could be the increased significance of commercial and industrial foundations in the Danish economy.