Credit Booms Gone Bust: Monetary Policy, Leverage Cycles, and Financial Crises, 1870–—2008

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...

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Bibliographic Details
Published in:The American economic review Vol. 102; no. 2; pp. 1029 - 1061
Main Authors: Schularick, Moritz, Taylor, Alan M.
Format: Journal Article
Language:English
Published: Nashville American Economic Association 01.04.2012
American Economic Assoc
Subjects:
1870-2008
19th century
20th century
21st century
Alliances
Bank assets
Bank credit
Bank liabilities
Bank loans
Banking crises
Central banks
Credit
Cross-national analysis
Datasets
Economic busts
Economic crises
Economic crisis
Economic history
Economic indicators
Economic policy
Economics
Financial crisis
Financial economics
Historical analysis
Industrialized nations
Macroeconomics
Monetary policy
Money
Money and credit
Money supply
Policy making
Shorter Papers
Stock prices
Studies
ISSN:0002-8282, 1944-7981
Online Access:Get full text
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Description
Summary: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
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ISSN:0002-8282
1944-7981
DOI:10.1257/aer.102.2.1029