Financial Cycles and Crises
DOI link for Financial Cycles and Crises
Financial Cycles and Crises book
According to Schularick and Taylor, lagged credit growth is a predictor of financial crises and financial stability risks increase with the size of the financial sector. This chapter presents issues pertaining to the measurement, the drivers, and the predictability of financial cycles. However, financial cycles are longer, deeper, and sharper than business cycles. However, there is no unanimously accepted definition of financial crises. Since the Great Financial Crisis (GFC), recent research has investigated balance sheet and leverage constraints facing all types of borrowers and the non-linear character of financial crises. In their survey of new research on financial crises, Gertler and Gilchrist note that the GFC necessitated to shift more attention to balance sheet constraints and leverage facing households and banks, and to capture the nonlinear dimension of financial crises. Mian and Sufi focus on the "credit-driven household demand channel" which rests on three pillars: Moreover, financial crises are non-linear events with asymmetric movements during the boom and the bust phases. .