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Financial sector amplification and credit cycles in New Zealand

  • Rebecca Craigie
  • Anella Munro

    (Reserve Bank of New Zealand)

This article explores some of the channels through which the financial system may amplify business cycles in New Zealand. Such amplification (‘procyclicality’) has been of interest for decades when considering financial booms and crises. There has been particular interest recently in understanding mechanisms through which the financial sector contributed to both the expansion of credit in 2003-07 and the subsequent pressure to reduce leverage during the financial crisis. This article focuses the discussion on New Zealand with emphasis on the credit boom of 2003-07 and the recent fall in credit growth, though the latter has been modest by international standards.

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File URL: http://rbnz.govt.nz/research_and_publications/reserve_bank_bulletin/2010/2010jun73_2craigiemunro.pdf
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Article provided by Reserve Bank of New Zealand in its journal Reserve Bank of New Zealand Bulletin.

Volume (Year): 73 (2010)
Issue (Month): (June)
Pages: 15-34

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Handle: RePEc:nzb:nzbbul:june2010:3
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  1. Ben Bernanke & Mark Gertler & Simon Gilchrist, 1998. "The Financial Accelerator in a Quantitative Business Cycle Framework," NBER Working Papers 6455, National Bureau of Economic Research, Inc.
  2. Aoki, Kosuke & James Proudman & Gertjan Vlieghe, 2003. "House prices, consumption, and monetary policy: a financial accelerator approach," Royal Economic Society Annual Conference 2003 7, Royal Economic Society.
  3. Charles T. Carlstrom & Timothy S. Fuerst, 2001. "Monetary policy in a world without perfect capital markets," Working Paper 0115, Federal Reserve Bank of Cleveland.
  4. Andrea Gerali & Stefano Neri & Luca Sessa & Federico M. Signoretti, 2010. "Credit and Banking in a DSGE Model of the Euro Area," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 42(s1), pages 107-141, 09.
  5. Don H Kim & Mico Loretan & Eli M Remolona, 2010. "Contagion and risk premia in the amplification of crisis: evidence from Asian names in the global CDS market," BIS Papers chapters, in: Bank for International Settlements (ed.), The international financial crisis and policy challenges in Asia and the Pacific, volume 52, pages 318-339 Bank for International Settlements.
  6. Skander Van den Heuvel, 2006. "The Bank Capital Channel of Monetary Policy," 2006 Meeting Papers 512, Society for Economic Dynamics.
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