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Identifying Credit Crunches

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  • RAYMOND E. OWENS
  • STACEY L. SCHREFT

Abstract

This article identifies four U.S. credit crunches-periods of sharply increased non-price credit rationing-between 1960 and 1992. Extreme intimidation of banks by the Federal Reserve and U.S. federal government through jawboning and credible threats of increased regulatory oversight caused the crunches of 1966 and 1969. Thus, this article overturns the conventional wisdom that Regulation Q produced the 1960s credit crunches. The 1980 crunch was the unintended effect of direct regulatory limits on credit extensions. More recently, a market-induced crunch occurred from early 1990 through 1992 when a collapse of commercial real estate values made pricing risk on real estate-collateralized loans extremely difficult. Copyright 1995 Western Economic Association International.

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Bibliographic Info

Article provided by Western Economic Association International in its journal Contemporary Economic Policy.

Volume (Year): 13 (1995)
Issue (Month): 2 (04)
Pages: 63-76

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Handle: RePEc:bla:coecpo:v:13:y:1995:i:2:p:63-76

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  1. Berger, Allen N & Udell, Gregory F, 1992. "Some Evidence on the Empirical Significance of Credit Rationing," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 100(5), pages 1047-77, October.
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Citations

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Cited by:
  1. Cara S. Lown & Donald P. Morgan, 2002. "Credit effects in the monetary mechanism," Economic Policy Review, Federal Reserve Bank of New York, Federal Reserve Bank of New York, issue May, pages 217-235.
  2. Shaffer, Sherrill & Hoover, Scott, 2008. "Endogenous screening, credit crunches, and competition in laxity," Review of Financial Economics, Elsevier, Elsevier, vol. 17(4), pages 296-314, December.
  3. Michael Devaney & William Weber, 2002. "Small-Business Lending and Profit Efficiency in Commercial Banking," Journal of Financial Services Research, Springer, Springer, vol. 22(3), pages 225-246, December.
  4. Christina D. Romer & David H. Romer, 1993. "Credit Channel or Credit Actions? An Interpretation of the Postwar Transmission Mechanism," NBER Working Papers 4485, National Bureau of Economic Research, Inc.
  5. McMillin, W. Douglas, 1996. "Monetary policy and bank portfolios," Journal of Economics and Business, Elsevier, Elsevier, vol. 48(4), pages 315-335, October.
  6. Robert T. Clair & Paula Tucker, 1993. "Six causes of the credit crunch," Economic and Financial Policy Review, Federal Reserve Bank of Dallas, Federal Reserve Bank of Dallas, issue Sep, pages 1-19.
  7. Michael D. Bordo & Joseph G. Haubrich, 2009. "Credit crises, money, and contractions: A historical view," Working Paper 0908, Federal Reserve Bank of Cleveland.
  8. John A. Weinberg, 1995. "Cycles in lending standards?," Economic Quarterly, Federal Reserve Bank of Richmond, Federal Reserve Bank of Richmond, issue Sum, pages 1-18.
  9. John A. Weinberg, 1994. "Firm size, finance, and investment," Economic Quarterly, Federal Reserve Bank of Richmond, Federal Reserve Bank of Richmond, issue Win, pages 19-40.
  10. Mark Carey S. & Stephen Prowse & John Rea & Gregory Udell, 1993. "The economics of the private placement market," Staff Studies, Board of Governors of the Federal Reserve System (U.S.) 166, Board of Governors of the Federal Reserve System (U.S.).
  11. Pecchenino, Rowena A., 1998. "Risk averse bank managers: Exogenous shocks, portfolio reallocations and market spillovers," Journal of Banking & Finance, Elsevier, Elsevier, vol. 22(2), pages 161-174, February.
  12. Anil K. Kashyap & Jeremy C. Stein, 1994. "Monetary Policy and Bank Lending," NBER Chapters, in: Monetary Policy, pages 221-261 National Bureau of Economic Research, Inc.
  13. Paolo Del Giovane & Ginette Eramo & Andrea Nobili, 2010. "Disentangling demand and supply in credit developments: a survey-based analysis for Italy," Temi di discussione (Economic working papers), Bank of Italy, Economic Research and International Relations Area 764, Bank of Italy, Economic Research and International Relations Area.

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