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Title:The global credit boom: Challenges for macroeconomics and policy PDF Logo
Authors:Hume, Michael
Sentance, Andrew
Issue Date:2009
Series/Report no.:External MPC unit discussion paper 27
Abstract:The recent financial crisis has put the spotlight on the rapid rise in credit which preceded it. In this paper, we provide an empirical and theoretical analysis of the credit boom and the macroeconomic context in which it developed. We find that the boom was unusually long and associated with neither particularly strong growth nor rising inflation in the economies in which it took place. We show that this type of credit and financial cycle is hard to reconcile with existing economic theory and argue that, while the 'global savings glut' may account for the cycle's initial phase, other factors such as the conduct of monetary policy and perceptions of declining macroeconomic risk were more important from the mid-2000s onwards. We conclude by identifying some of the challenges now facing macroeconomics and policy.
Subjects:credit
business cycle
financial crisis
monetary policy
asset prices
boom and bust
JEL:E30
E50
Document Type:Working Paper
Appears in Collections:External MPC Unit Discussion Papers, Bank of England

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