Economic policy makers, macroprudential supervisors or investors need reliable empiri- cal estimates of the equilibrium level of credit in the economy. When the level of credit is low, high dynamics of credit might re°ect an adjustment to the equilibrium, ¯nancial deepening in emerging economies for instance. When the level of credit is high, even a one-digit growth rate of credit may be considered excessive. Deviations of credit from its equilibrium often lead to a widening of macroeconomic imbalances, . rising in°a- tion, asset bubbles, ine±cient booms and bursts or instability of the ¯nancial system. Moreover, banks are also interested in the relationship between their credit policies and the.
