This paper analyses the equilibrium level of private credit to GDP in 11 Central and Eastern European (CEE) countries on the basis of a number of dynamic panels containing quarterly data on CEE economies, emerging markets and developed OECD countries. In doing so, we propose a unify- ing framework which includes factors driving both the demand for and the supply of private credit. We emphasise that relying on in-sample panel estimates for transition economies is problematic not only because of the possible upward bias of the estimated constant and slope coe¢ cients due to the initial undershooting and the ensuing steady adjustment towards equilibrium, but also because of instabilitiy.
