Retesting Financial Decoupling Hypothesis: An Empirical Study
Retesting Financial Decoupling Hypothesis: An Empirical Study

Summary/Abstract: In this article, we set ourselves a task to test financial decupling hypothesis by studying 18 national credit cycles in developed and developing countries, using monthly data on growth rates of loans to nonfinancial sector for the period from January 2002 to January 2015. The purpose of this article is empirical testing of two hypotheses: validity of financial decoupling for developing economies and empirical testing of Russian credit market’s sensitivity to shocks in other national economies. In result, we come to the following conclusions. Firstly, the relationship between credit cycles of countries in the sample over the studied period exists and persists in the short, and is absent in the long run. Secondly, testing the financial decoupling hypothesis between developed and developing countries does not confirm it in its classic state. In the short run, a number of sampled developing countries are sensitive to external credit shocks from developed countries. Third, we have found presence of both long and short-term sensitivity of Russian credit market to shocks in both developed and developing countries. These results confirm the necessity of reconsidering conventional theory of credit market and international finance, and also have tobe taken into account when conducting national monetary policy.

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