Credit Booms, Financial Crises and Macroprudential Policy
Mark Gertler (),
Nobuhiro Kiyotaki and
No 27481, NBER Working Papers from National Bureau of Economic Research, Inc
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.
JEL-codes: E00 (search for similar items in EconPapers)
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Published as Mark Gertler & Nobuhiro Kiyotaki & Andrea Prestipino, 2020. "Credit booms, financial crises, and macroprudential policy," Review of Economic Dynamics, vol 37, pages S8-S33.
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Journal Article: Credit Booms, Financial Crises, and Macroprudential Policy (2020)
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