Curbing the Credit Cycle - speech by Andy Haldane

Speaking at the Columbia University Center on Capitalism and Society Annual Conference in New York, Andrew Haldane - Executive Director for Financial Stability - examines the causes and consequences of credit cycles and draws implications for the design of public policy.
Published on 20 November 2010

Andrew Haldane draws on a range of new evidence to state that credit cycles are clearly identifiable and regular phenomena across countries and through time, differing in frequency and scale to business cycles. He notes that in many cases financial crises are preceded by a credit boom, which provides ".relatively concrete evidence of the credit cycle having real and damaging effects on output". He explains that credit cycles can arise as a result of co-ordination or collective action failures among lenders, with firms taking decisions that are individually rational but collectively sub-optimal. It is important to understand these frictions and how they can be solved in order to help shape new macroprudential frameworks, including the creation of new macroprudential committees, like the Financial Policy Committee.

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