Working Paper: NBER ID: w21039
Authors: Alan M. Taylor
Abstract: Since the 2008 global financial crisis, and after decades of relative neglect, the importance of the financial system and its episodic crises as drivers of macroeconomic outcomes has attracted fresh scrutiny from academics, policy makers, and practitioners. Theoretical advances are following a lead set by a fast-growing empirical literature. Recent long-run historical work has uncovered a range of important stylized facts concerning financial instability and the role of credit in advanced economies, and this article provides an overview of the key findings.
Keywords: credit; financial stability; macroeconomy
JEL Codes: E02; E31; E42; E44; E51; E58; F32; F42; G01; G20; G28; N10; N20
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| significant credit buildup (G51) | rising financial instability risk (F65) |
| credit conditions (F34) | onset of financial crises (F65) |
| credit growth (E51) | likelihood of financial crisis (G01) |
| financial crises (G01) | deeper and longer recessions (E32) |
| credit overhang (G32) | recovery performance (P27) |
| credit conditions (F34) | subsequent economic performance (P17) |