This paper investigates the effect of credit booms on systemic banking crises
which is defined as the coincidence of the financial distress and the spillover
on the real economy. Using a panel data of 45 countries over 1973-2010 on
systemic banking crises data from Laeven and Valencia (2012) and private
credit loan data from IMF IFS, we find that credit booms precede crises and
work as a cause. In the analysis, we add real house price fluctuation. Unlike
Gourinchas and Obstfeld (2012)’s result, we find a new evidence that credit
booms significantly affect the systemic banking crises in both advanced and
emerging economies after financial liberalization. We also find housing prices
begin to drop before crises in advanced economies while begin to drop price
only after crises in emerging markets.