Where danger lurks

Olivier Blanchard 03 October 2014

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Until the 2008 global financial crisis, mainstream US macroeconomics had taken an increasingly benign view of economic fluctuations in output and employment. The crisis has made it clear that this view was wrong and that there is a need for a deep reassessment.

The benign view reflected both factors internal to economics and an external economic environment that for years seemed indeed increasingly benign.

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Topics:  Macroeconomic policy Monetary policy

Tags:  macroeconomics, global crisis, great moderation, rational expectations, nonlinearities, fluctuations, business cycle, monetary policy, inflation, bank runs, deposit insurance, sudden stops, capital flows, liquidity, maturity mismatch, zero lower bound, liquidity trap, capital requirements, credit constraints, precautionary savings, housing boom, Credit crunch, unconventional monetary policy, fiscal policy, sovereign default, diabolical loop, deflation, debt deflation, financial regulation, regulatory arbitrage, DSGE models

Who is to blame for the credit crunch: foreign ownership or foreign funding?

Erik Feyen, Raquel Letelier, Inessa Love, Samuel Munzele Maimbo, Roberto Rocha 15 March 2014

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From boom to crunch

Although most developing countries around the world experienced a severe contraction of bank credit during the recent global financial crisis, the Eastern Europe and Central Asia (ECA) region was disproportionately hit after it had experienced very high credit growth (Figure 1).

Figure 1. Banking system trends in ECA

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Topics:  Financial markets Global crisis International finance

Tags:  Credit crunch, global financial crisis, banking, Eastern Europe, cross-border banking, credit growth, Central Asia

Job losses from the credit crunch during the Great Recession

Samuel Bentolila, Marcel Jansen 01 February 2014

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Policymakers in both Europe and the US are concerned about the economic implications of the current shortage of credit. As the International Monetary Fund put it recently, “policymakers want to support markets because the decline in lending is seen to be a primary factor in the slow recovery” (IMF 2013).

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Topics:  Global crisis

Tags:  Spain, Credit crunch, Great Recession, job losses

Is lending by state banks more stable over the business cycle?

Ata Can Bertay, Asli Demirgüç-Kunt, Harry Huizinga 02 August 2012

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During the banking crisis of 2008-2009, government bailouts of banks in Europe and elsewhere frequently resulted in state ownership of the bank. The rescue of Fortis Bank in 2008, for instance, involved the nationalisation of ABN Amro by the Dutch state.

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Topics:  Global crisis International finance

Tags:  Credit crunch, Bailouts, state banks, bank ownership

Credit demand, supply, and conditions: A tale of three crises

Sarah Holton, Martina Lawless, Fergal McCann 04 March 2012

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The post-2007 Eurozone economic crisis has taken on a number of forms. Real economic activity has declined, in certain cases significantly. Turmoil in sovereign and financial sectors has seen yields on government bonds and spreads on bank credit-default swaps (CDSs) increase dramatically. The vast credit expansion of the previous decade has led to large private sector debt overhang.

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Topics:  Europe's nations and regions International finance

Tags:  Credit crunch, Small and medium enterprises, Eurozone crisis, credit

Home bias and the credit crunch: Evidence from Italy

Andrea F Presbitero, Gregory F Udell, Alberto Zazzaro 12 February 2012

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The management of the Eurozone sovereign debt crisis will have significant effects on the stability of national banking systems, as argued in some recent Vox columns (Acharya et al 2011, Wyplosz 2011). The interaction between the debt crisis and banking risk will likely affect bank capital positions and might also affect bank liquidity and the fragility of the interbank markets.

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Topics:  Financial markets

Tags:  Italy, Credit crunch, banks, cross-border banking

European Banking Authority and the capital of European banks: Don’t shoot the messenger

Marco Onado, Andrea Resti 07 December 2011

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The newborn European Banking Authority (EBA) has been fiercely criticised in the first few months of its life. According to many observers:

  • This summer’s stress tests were ineffective; and
  • The October rise in capital ratios to 9% has raised concerns about a massive credit crunch

We think these criticisms are off the mark. As happens to regulators, analysts are in the process of shooting the messenger because they don’t like the message.

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Topics:  EU policies Financial markets

Tags:  Credit crunch, stress tests, European Banking Authority

The credit crunch of 1294: Causes, consequences and the aftermath

Adrian R. Bell, Chris Brooks, Tony Moore 13 May 2009

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The Ricciardi and Edward I

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Topics:  Economic history Financial markets

Tags:  Credit crunch, economic history, Edward I

Fiscal policy and the credit crunch: What will work?

Daniel Gros 21 December 2008

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As the real economy sinks quickly into a deep recession, governments are groping for measures to limit the downturn. And as interest rates are quickly bumping against the zero bound, an aggressive use of fiscal policy seems to be the only way to sustain demand.  Fiscal policy seems particularly appropriate since our macroeconomic models tell us that fiscal policy multipliers increase when more economic agents become liquidity constrained because they are then likely to spend any additional income they receive.

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Topics:  Macroeconomic policy

Tags:  Credit crunch, fiscal stimulus

India’s credit crunch conundrum

Arvind Subramanian 10 November 2008

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How can India be facing credit crunch if credit continues to grow at a torrid 30%? Yet, it is undeniable that call rates have risen sharply to double-digit levels. What is going on? And how should monetary policy respond?

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Topics:  Financial markets

Tags:  interest rates, India, Credit crunch

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