Robust Estimation of Credit Shocks in Peru during the COVID-19 Crisis

Abstract The Covid-19 pandemic introduced an unprecedented disruption in macroeconomic activity while credit continued to expand in several economies due to large policy interventions aimed at preserving financial intermediation. In Peru, this episode represented a clear deviation from the historical relationship between credit growth and economic activity. This paper studies the transmission of credit supply and credit demand shocks using a Bayesian structural VAR estimated with monthly macro-financial data from 2010 to 2024. To account for the extreme volatility observed during the pandemic, the identification combines sign and zero restrictions with information from higher-order moments and heteroskedasticity. The results indicate that, conditional on the maintained identifying assumptions, credit supply shocks are associated with stronger responses of economic activity during and after the pandemic than in the pre-pandemic period, while credit demand shocks display weaker and less persistent responses. These findings suggest that credit conditions became a more important driver of macroeconomic fluctuations during episodes of heightened uncertainty, although the framework does not separately identify policy-induced credit shocks.