Credit shocks boost economies, but beware the fall

Monday, Aug 14, 2017
by vrosenth

Atif Mian, Amir Sufi and Emil Verne's recent work on the impact of credit shocks in the short and in the medium term was reported in the Chicago Booth Review.  Based on the regulatory rollbacks implemented in the US in the 1980s, the authors conclude that regulatory easing can boost economic activity in the upswing of a business cycle but it can also magnify the effects of a downturn.  Lawmakers currently contemplating roll backs to banking regulations put in place after the Great Recession should consider these important findings. You can read the Chicago Booth Review article here

Work cited: Atif Mian, Amir Sufi, and Emil Verner, “How Do Credit Supply Shocks Affect the Real Economy? Evidence from the United States in the 1980s,” Working paper, May 2017.