2021
DOI: 10.1057/s41308-020-00125-1
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Abstract: In this paper, I begin by providing a brief survey of recent research that highlights some of the key empirical facts about credit cycles. Next, I interpret these facts through a conceptual lens, asking what theoretical mechanisms appear to be most consistent with the data. And finally, I pose the question of what policymakers can do-with either regulatory tools or monetary policy-to help moderate creditdriven fluctuations in real activity. This paper is a lightly edited version of remarks given as the Mundell… Show more

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Cited by 8 publications
(6 citation statements)
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References 57 publications
(49 reference statements)
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“…2014 ; Baron et al. 2021 ; Stein 2021 ). In this "capital crunch" view of financial crises, faced with an equity shortfall, banks try to reduce leverage and restore their balance sheets.…”
Section: Gross Direct Interventionsmentioning
confidence: 99%
“…2014 ; Baron et al. 2021 ; Stein 2021 ). In this "capital crunch" view of financial crises, faced with an equity shortfall, banks try to reduce leverage and restore their balance sheets.…”
Section: Gross Direct Interventionsmentioning
confidence: 99%
“…According to Bordo et al (2001), the financial crisis is described as a bank run, started by the rapid growth of bank loans five years preceding the crisis, increasing the probability of a crisis significantly. According to Stein (2021), an econometrician looking at the rapid growth of banking credit might conclude that the economy is in a vulnerable state. However, the rapid increase in debt does not always indicate that the crisis will occur and depends on whether the market is emerging.…”
Section: Literature Reviewmentioning
confidence: 99%
“…The research from Krishnamurthy and Muir (2017), using the data from the last 150 years, has found that price and quantity behaviour suggests that credit supply expansions are a precursor to the crisis. According to Stein (2021), looking at the impact of the credit boom on output, the government should implement a regulation that can follow the movement of credit, especially when the credit spreads are narrow, and there is a lot of lowquality debt issuance. Stein (2021) suggests the policy that can tame the credit are dynamic recapitalization, regulatory arbitrage, and lack of time-varying macroprudential tools, such as countercyclical capital buffer.…”
Section: Literature Reviewmentioning
confidence: 99%
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“…To perform this role, monetary policy may temporarily have to deviate from price stability; this, in the presence of nominal rigidities, is costly. The exact nature of these costs depends on the model 35 See, for example, Farhi and Werning (2016), Caballero and Simsek (2019) and Stein (2021).…”
Section: Partial Effectiveness Of the Macroprudential Policy Framework: Implications For Monetary Policymentioning
confidence: 99%