Credit and exchange rates are linked
Comparing DEC alternative conversion factor (LCU per US$) with Net domestic credit (current LCU), per unit of GDP across 167 countries, 2024–2025.
- Rank correlation
- +0.93
- Holding size constant
- +0.92
- Countries compared
- 167
- Period
- 2024–2025
What might link these
The strong correlation between DEC alternative conversion factor and net domestic credit per unit of GDP may suggest a relationship between a country's monetary policy and its exchange rate. A careful reader should consider the potential impact of inflation, a likely confounder, on both indicators. The relationship could be driven by underlying economic conditions rather than a direct link between the two variables.
Why this is not proof of anything
This is a correlation across countries, not an experiment. It cannot show that either indicator causes the other, and both may simply follow a third thing. This correlation could mislead by implying a causal relationship between credit and exchange rates, when in fact they may both be responding to other economic factors.
The second figure above repeats the measurement with national population and income held constant. It is the more conservative number: a relationship that largely disappears there was mostly telling you that larger, richer countries have more of most things.
How this was measured
Both indicators were ranked across every country reporting each, and the two rankings compared — ranks rather than raw values, because a handful of very large countries can otherwise manufacture a relationship on their own. The calculation is arithmetic over figures already published on this site; the commentary above is drafted from the two indicator names and the resulting coefficients.