Credit Booms, Financial Crises and Macroprudential Policy

Mark Gertler, Nobuhiro Kiyotaki and Andrea Prestipino
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Nobuhiro Kiyotaki: Princeton University
Andrea Prestipino: Federal Reserve Board

Working Papers from Princeton University. Economics Department.

Abstract: We develop a model of banking crises which Is consistent with two important features of the data: First, banking crises are usually preceded by credit booms. Second, credit booms often do not result in a crisis. That is, there are "good" booms as well as "bad" booms in the language of Gorton and Ordonez (2019). We then consider how the optimal macroprudential policy weighs the benefits of preventing a crisis against the costs of stopping a good boom. We show that countercyclical capital buffers are a critical feature of a successful macropudential policy.

Keywords: banking crisis; credit booms (search for similar items in EconPapers)
JEL-codes: E00 G21 (search for similar items in EconPapers)
Date: 2020-03
New Economics Papers: this item is included in nep-dge, nep-fdg, nep-mac and nep-mon
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Citations: View citations in EconPapers (16)

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http://www.princeton.edu/~kiyotaki/papers/GKP_RED_2020_latex.pdf

Related works:
Journal Article: Credit Booms, Financial Crises, and Macroprudential Policy (2020)
Working Paper: Credit Booms, Financial Crises and Macroprudential Policy (2020)
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Persistent link: https://EconPapers.repec.org/RePEc:pri:econom:2020-62

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