Template-Type: ReDIF-Article 1.0 Author-Name: Zsuzsanna Hosszú Author-Email: hosszuzs@mnb.hu Author-Workplace-Name: Magyar Nemzeti Bank (the central bank of Hungary) Author-Name: Gyöngyi Körmendi Author-Email: kormendigyo@mnb.hu Author-Workplace-Name: Magyar Nemzeti Bank (the central bank of Hungary) Author-Name: Bálint Tamási Author-Email: balint.tamasi@gmail.com Author-Workplace-Name: Author-Name: Balázs Világi Author-Email: vilagib@mnb.hu Author-Workplace-Name: Magyar Nemzeti Bank (the central bank of Hungary) Title: Impact of the credit supply on the Hungarian economy Abstract: We examine developments in credit supply in recent years and the significance of its role using different approaches and various methods. Based on these, we can establish that credit supply is a significant factor in terms of the development of the Hungarian economy both during crisis periods and during the normal economic cycle. The procyclical behaviour of the financial sector considerably contributed to the excessive credit outflow before 2008, and to a large extent, it was the driver behind economic activity during that period. At the same time, the economic downturn, lasting since 2008, is also significantly attributable to the credit supply behaviour of the banking system. Taking a closer look at the corporate credit market, we can state that the contraction which has ensued since the onset of the crisis until now was attributable to the tightening of supply and a decline in demand, in a fifty-fifty ratio. However, the picture may be qualified further according to the size of the companies: in the case of large enterprises the shrinkage of the credit portfolio is attributable more to the fall in demand, while in the case of small companies to the tightening of supply. Analysing the issue broken down by industries, we find that not all competitive and export eligible industries can borrow in the required volume, while there are other industries which, compared to their economic prospects, encounter much more generous credit supply - most probably out of necessity. Such distortions in the distribution of resources may generate welfare losses. Classification-JEL: E32, E44, E51 Keywords: credit supply, corporate lending, credit dynamic in crisis Journal: MNB Bulletin Pages: 81-90 Volume: 8 Issue: Special Year: 2013 Month: October File-URL: http://www.mnb.hu/letoltes/hosszu-kormendi-tamasi-vilagi.pdf File-Format: Application/pdf Handle: RePEc:mnb:bullet:v:8:y:2013:i:Special:p:81-90