João Granja, Christian Leuz, Raghuram Rajan, 04 December 2018

Risk taking was pervasive during the Global Crisis even in the most unlikely areas, such as stretching to lend at a distance. Using US data, this column examines the degree to which competition amongst lenders interacts with the cyclicality in lending standards using a simple and policy-relevant measure, the average physical distance of borrowers from banks’ branches. It finds that distances widen considerably when credit conditions are lax and shorten considerably when credit conditions become tighter. A sharp departure from the trend in distance between banks and borrowers is indicative of increased risk taking. 

Keiichiro Kobayashi, 02 May 2017

There is concern about the persistent slowdown of economic growth in the aftermath of financial crises. This column presents a framework which shows that excessive debt accumulated by firms and households during a crisis can cause persistent stagnation. Relief from excessive debt has a direct impact on economic growth, whereas unconventional monetary and fiscal policies cannot directly solve the fundamental debt problem.

Events

CEPR Policy Research