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Credit: a starring role in the downturn

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  • Òscar Jordà

Abstract

Credit is a perennial understudy in models of the economy. But it became the protagonist in the Great Recession, reviving a role it had not played since the Great Depression. In fact, the central part played by credit in the downturn and weak recovery of recent years is not unusual. A study of 14 advanced economies over the past 140 years shows that financial crises have frequently led to severe and prolonged recessions. Shining the spotlight on credit turns out to be crucial in understanding recent economic events and the outlook.

Suggested Citation

  • Òscar Jordà, 2012. "Credit: a starring role in the downturn," FRBSF Economic Letter, Federal Reserve Bank of San Francisco, issue apr16.
    • Handle: RePEc:fip:fedfel:y:2012:i:apr16:n:2012-12
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    References listed on IDEAS

    as
    1. Taylor, Alan M. & Schularick, Moritz & Jordà , Òscar, 2011. "When Credit Bites Back: Leverage, Business Cycles, and Crises," CEPR Discussion Papers 8678, Centre for Economic Policy Research.
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