The numerous financial crises in the 20th and 21st century demonstrate the role of excessive credit
as the main instigator of financial crises. Could this excessive credit be natural byproducts of
lingering economic ailments such as, income inequality, property bubbles and persistent current
account imbalances? This study attempts to answer this question by applying the Least Squares
Dummy Variable (LSDVC) and dynamic GMM estimations based on the data of ten countries
from the year 2004 to 2012. Whilst past literature have investigated the effect of income
inequality, dominant real estate sector and current account imbalances on excessive credit
separately, this study extends the literature by examining the impact of all three variables on
excessive credit aggregately. Our findings tend to indicate that there do exist a positive
relationship between all three variables and excessive credit. However, we found that only income
inequality and the real estate sector contribute significantly to excessive credit but current
account imbalances only marginally do so. We also discovered that the contribution to excessive
credit by the banking sector is just about twice the amount of all three variables combined. Our
results serve as evidence for policymakers interested in reducing excessive credit by controlling
all three variables as well as the banking sector