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

Atif Mian and Amir Sufi

No 24322, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: Every major financial crisis leaves its unique footprint on economic thought. The early banking crises taught us the importance of financial sector liquidity and the lender of last resort. The Great Depression highlighted the devastating effects of bank failures and the need for counter-cyclical fiscal and monetary policy. The Great Recession has brought to the surface the importance of credit-driven business cycles that operate through household demand. We discuss empirical evidence accumulated over the last decade supporting this view, and we also describe accompanying theoretical work that helps define these concepts.

JEL-codes: E32 E5 G01 G2 R2 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-mac
Date: 2018-02
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Published as Atif Mian & Amir Sufi, 2018. "Finance and Business Cycles: The Credit-Driven Household Demand Channel," Journal of Economic Perspectives, vol 32(3), pages 31-58.

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