Finance and Business Cycles: The Credit-Driven Household Demand Channel

Atif Mian and Amir Sufi

Journal of Economic Perspectives, 2018, vol. 32, issue 3, 31-58

Abstract: What is the role of the financial sector in explaining business cycles? This question is as old as the field of macroeconomics, and an extensive body of research conducted since the Global Financial Crisis of 2008 has offered new answers. The specific idea put forward in this article is that expansions in credit supply, operating primarily through household demand, have been an important driver of business cycles. We call this the credit-driven household demand channel. While this channel helps explain the recent global recession, it also describes economic cycles in many countries over the past 40 years.

JEL-codes: D12 E21 E32 E44 F44 G01 (search for similar items in EconPapers)
Date: 2018
Note: DOI: 10.1257/jep.32.3.31
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Citations: View citations in EconPapers (131)

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Working Paper: Finance and Business Cycles: The Credit-Driven Household Demand Channel (2018)
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