Feedbacks: Financial Markets and Economic Activity

Is credit expansion a sign of desirable financial deepening or the prelude to an inevitable bust? We study this question in modern US data using a structural VAR model of 10 monthly frequency variables, identified by heteroskedasticity. Negative reduced-form responses of output to credit growth are...

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Veröffentlicht in:	The American economic review 2021-06, Vol.111 (6), p.1845-1879
Hauptverfasser:	Brunnermeier, Markus, Palia, Darius, Sastry, Karthik A., Sims, Christopher A.
Format:	Artikel
Sprache:	eng
Schlagworte:	1973 -2015 Finanzkrise Geldpolitik Konjunktur Kreditmarkt Schock USA VAR-Modell Wirtschaftswachstum
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description	Is credit expansion a sign of desirable financial deepening or the prelude to an inevitable bust? We study this question in modern US data using a structural VAR model of 10 monthly frequency variables, identified by heteroskedasticity. Negative reduced-form responses of output to credit growth are caused by endogenous monetary policy response to credit expansion shocks. On average, credit and output growth remain positively associated. “Financial stress” shocks to credit spreads cause declines in output and credit levels. Neither credit aggregates nor spreads provide much advance warning of the 2008–2009 crisis, but spreads improve within-crisis forecasts.
doi_str_mv	10.1257/AER.20180733
format	Article
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source	Jstor Complete Legacy; Business Source Complete; American Economic Association Web
subjects	1973 -2015 Finanzkrise Geldpolitik Konjunktur Kreditmarkt Schock USA VAR-Modell Wirtschaftswachstum
title	Feedbacks: Financial Markets and Economic Activity
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