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Credit booms: implications for the public and the private sector

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  • Tano Santos

Abstract

The pre-crisis period was characterised by ample liquidity, a credit boom, and low yields in a wide range of asset classes. It was also defined by the accumulation of risks on and off the balance sheets of many financial intermediaries, particularly banks, as well as by a substantial increase in public and private sector debt in some countries. Understanding the relation between liquidity and the excessive accumulation of risks remains a central policy question. How do credit booms affect incentives? In the case of the government sector, credit booms may affect the incentives of different interest groups to agree on policies for reform or fiscal stabilisation. In the case of the private sector, it may change the incentives of originators to produce good assets. Credit booms complicate the evaluation of policies and agents and in addition may facilitate the entrenchment of interest groups and the deterioration of governance institutions.

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  • Tano Santos, 2015. "Credit booms: implications for the public and the private sector," BIS Working Papers 481, Bank for International Settlements.
    • Handle: RePEc:bis:biswps:481
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    References listed on IDEAS

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    Cited by:

    1. Deniz Igan & Alexandre R. Lauwers & Damien Puy, 2022. "Capital flows and institutions," BIS Working Papers 994, Bank for International Settlements.
    2. Alper Kara & David Marques-Ibanez & Steven Ongena, 2015. "Securitization and Credit Quality," International Finance Discussion Papers 1148, Board of Governors of the Federal Reserve System (U.S.).
    3. Alper Kara & David Marques‐Ibanez & Steven Ongena, 2019. "Securitization and credit quality in the European market," European Financial Management, European Financial Management Association, vol. 25(2), pages 407-434, March.
    4. Anni Huang & Narayan Kundan Kishor, 2019. "The rise of dollar credit in emerging market economies and US monetary policy," The World Economy, Wiley Blackwell, vol. 42(2), pages 530-551, February.
    5. Alejandro Justiniano & Giorgio E. Primiceri & Andrea Tambalotti, 2022. "The Mortgage Rate Conundrum," Journal of Political Economy, University of Chicago Press, vol. 130(1), pages 121-156.
    6. I. Balyuk & И. Балюк А., 2018. "Проблема внешнего долга и мировая финансовая архитектура // External Debt Problem and Global Financial Architecture," Review of Business and Economics Studies // Review of Business and Economics Studies, Финансовый Университет // Financial University, vol. 6(4), pages 18-29.
    7. Landais, Bernard, 2018. "Renoncer à la théorie des zones monétaires optimales ? [Renouncing to the Optimal Currency Aera Theory ?]," MPRA Paper 85695, University Library of Munich, Germany.
    8. Miguel Angel Saldarriaga, 2017. "Credit Booms in Commodity Exporters," Working Papers 98, Peruvian Economic Association.
    9. van Riet, Ad, 2017. "Addressing the safety trilemma: a safe sovereign asset for the eurozone," ESRB Working Paper Series 35, European Systemic Risk Board.
    10. Claudio Borio & Marc Farag & Fabrizio Zampolli, 2023. "Tackling the fiscal policy-financial stability nexus," BIS Working Papers 1090, Bank for International Settlements.

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