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Boom-bust Cycles Revisited: The Role of Credit Supply

Author

Listed:
  • Kim, Hyo Sang

    (KOREA INSTITUTE FOR INTERNATIONAL ECONOMIC POLICY (KIEP))

  • Choi, Sangyup

    (Yonsei University)

  • Yang, Da Young

    (KOREA INSTITUTE FOR INTERNATIONAL ECONOMIC POLICY (KIEP))

  • Kim, Yuri

    (KOREA INSTITUTE FOR INTERNATIONAL ECONOMIC POLICY (KIEP))

Abstract

This study investigates the impacts of credit supply on economic growth and financial crisis. Excess credit supply can make the economy and financial markets more vulnerable. While credit supply can drive economic growth by reallocating resources, it can also make the economy and financial markets more fragile. Asset prices sharply fall when deleveraging occurs in the case of a negative shock to the financial or real sector in a system where credit is excessively supplied. Furthermore, economic activity might be substantially reduced, extending the length and breadth of the recession.

Suggested Citation

  • Kim, Hyo Sang & Choi, Sangyup & Yang, Da Young & Kim, Yuri, 2022. "Boom-bust Cycles Revisited: The Role of Credit Supply," World Economy Brief 22-4, Korea Institute for International Economic Policy.
    • Handle: RePEc:ris:kiepwe:2022_004
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    Keywords

    credit supply; economic growth; financial crisis; economy; shock;
    All these keywords.

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