Finance and Business Cycles: The Credit-Driven Household Demand Channel
Journal of Economic Perspectives
vol. 32,
no. 3, Summer 2018
(pp. 31-58)
(Complimentary)
Abstract
What is the role of the financial sector in explaining business cycles? This question is as old as the field of macroeconomics, and an extensive body of research conducted since the Global Financial Crisis of 2008 has offered new answers. The specific idea put forward in this article is that expansions in credit supply, operating primarily through household demand, have been an important driver of business cycles. We call this the credit-driven household demand channel. While this channel helps explain the recent global recession, it also describes economic cycles in many countries over the past 40 years.Citation
Mian, Atif, and Amir Sufi. 2018. "Finance and Business Cycles: The Credit-Driven Household Demand Channel." Journal of Economic Perspectives, 32 (3): 31-58. DOI: 10.1257/jep.32.3.31Additional Materials
JEL Classification
- D12 Consumer Economics: Empirical Analysis
- E21 Macroeconomics: Consumption; Saving; Wealth
- E32 Business Fluctuations; Cycles
- E44 Financial Markets and the Macroeconomy
- F44 International Business Cycles
- G01 Financial Crises
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