Working Paper: CEPR ID: DP9082
Authors: Alan M. Taylor
Abstract: What can history can tell us about the relationship between the banking system, financial crises, the global economy, and economic performance? Evidence shows that in the advanced economies we live in a world that is more financialized than ever before as measured by importance of credit in the economy. I term this long-run evolution ?The Great Leveraging? and present a ten--point examination of its main contours and implications.
Keywords: banking; booms; credit; crises; financial development; fiscal policy; global imbalances; great recession; recessions
JEL Codes: E3; E5; E6; N1; N2
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| size of the banking sector relative to GDP (F65) | risk of financial crises (G01) |
| financial crises (G01) | economic impact (F69) |
| credit growth (E51) | financial crises (G01) |
| credit growth (E51) | likelihood of financial crises (G01) |