Credit Booms Gone Bust: Replication of Schularick and Taylor (AER 2012)
This paper replicates the results in Schularick and Taylor (American Economic Review v.102, no. 2, pp. 1029 1061; ST hereafter) Specifically, I replicate ST's results in the "narrow" sense by reproducing their calculations in the open source econometrics package gretl. I also demonstrate the robustness of ST's findings to different estimation methods. I obtain qualitatively similar results to ST via Bayesian estimation of both static and dynamic panel probit models. Finally, I show that the marginal effects of credit growth on the probability of a financial crisis vary considerably across the countries in the data set.