Credit Booms Gone Bust: Monetary Policy, Leverage Cycles, and Financial Crises, 1870-2008
American Economic Review
vol. 102,
no. 2, April 2012
(pp. 1029-61)
Abstract
The financial crisis has refocused attention on money and credit fluctuations, financial crises, and policy responses. We study the behavior of money, credit, and macroeconomic indicators over the long run based on a new historical dataset for 14 countries over the years 1870-2008. Total credit has increased strongly relative to output and money in the second half of the twentieth century. Monetary policy responses to financial crises have also been more aggressive, but the output costs of crises have remained large. Credit growth is a powerful predictor of financial crises, suggesting that policymakers ignore credit at their peril. (JEL E32, E44, E52, G01, N10, N20)Citation
Schularick, Moritz, and Alan M. Taylor. 2012. "Credit Booms Gone Bust: Monetary Policy, Leverage Cycles, and Financial Crises, 1870-2008." American Economic Review, 102 (2): 1029-61. DOI: 10.1257/aer.102.2.1029Additional Materials
JEL Classification
- E32 Business Fluctuations; Cycles
- E44 Financial Markets and the Macroeconomy
- E52 Monetary Policy
- G01 Financial Crises
- N10 Economic History: Macroeconomics and Monetary Economics; Growth and Fluctuations: General, International, or Comparative
- N20 Economic History: Financial Markets and Institutions: General, International, or Comparative