Recent research suggests a point beyond which the benefits of financial development diminish, and further development can even hurt growth. This column describes how a negative relationship between credit and growth emerged strongly after 1990 and was particularly pronounced in the Eurozone, consistent with the notion that an overgrown financial sector weakens economic growth potential. It also argues that slower growth leads to more rapid financial sector expansion. Policymakers need to be aware of the possibility that causality runs in both directions.
Eilyn Yee Lin Chong, Ashoka Mody, Francisco Varela Sandoval, 17 January 2017
Angus Deaton, Nancy Cartwright, 09 November 2016
In recent years, the use of randomised controlled trials has spread from labour market and welfare programme evaluation to other areas of economics, and to other social sciences, perhaps most prominently in development and health economics. This column argues that some of the popularity of such trials rests on misunderstandings about what they are capable of accomplishing, and cautions against simple extrapolations from trials to other contexts.
Lutz Kilian, 13 November 2007
In Discussion Paper 6559 Research Fellow Lutz Killian dispels a number of myths concerning oil price shocks and their impact on the US economy. What is the origin of oil price shocks? Most oil price shocks since the 1970s have been driven by a combination of strong global demand for industrial commodities (including crude oil) and expectations shifts that increase precautionary demand for crude oil specifically.