fbpx Can Policy Tame the Credit Cycle? - Jeremy Stein | Harvard Kennedy School


November 2020, Paper: "In the decade since the Global Financial Crisis (GFC), there has been an outpouring of research on the topic of “credit cycles”, meaning macroeconomic fluctuations that are driven in significant part by variations in credit supply. With this work as a backdrop, my goal in this talk is threefold. First, I will provide a very brief and selective survey of a handful of papers that highlight some of the key empirical facts about credit cycles. Second, I will try to interpret these facts through a conceptual lens, asking what theoretical mechanisms appear to be most consistent with the data. And third, I will pose the question of what policies, if any, can be helpful in moderating these credit-driven fluctuations in real activity. In this regard, it is important to stress that credit-supply shocks are relevant for understanding more than just crises. As will become clear, they play an important role in garden-variety recessions and slowdowns as well. And to the extent that any form of policy, be it regulatory or monetary, aims to moderate the business cycle, it also needs to attend to these less dramatic, but more frequent kinds of credit-induced fluctuations." Read via Harvard University

Non-HKS Harvard Author Website - Jeremy Stein