Hostname: page-component-586b7cd67f-t7fkt Total loading time: 0 Render date: 2024-11-20T11:40:53.431Z Has data issue: false hasContentIssue false
  • English
  • Français

Financial Crises and the Prospects for Recession1

Published online by Cambridge University Press:  26 March 2020

Ray Barrell  and
Ian Hurst
Get access Rights & Permissions [Opens in a new window]

Extract

Crises have a common shape but not always common consequences, as Barrell and Davis (2005) discuss. Asset bubbles are associated with the run-up to most crises and regulators should respond, taking an asset bubble as a signal of a need for precautionary action. It is easy to say that fundamentals have changed an asset market, and hard to spot a bubble. It is also common to suggest that interest rate policy should be set to constrain bubbles such as those in housing markets in recent years. Not only is it difficult for the central bank to use interest rates to constrain a bubble, it is also inappropriate if inflation is under control. It is for the financial market regulator, which may or may not be in the central bank, to respond to the bubble and strengthen its precautionary measures designed to raise lending standards.

Type
Articles
Information
National Institute Economic Review , Volume 204 , April 2008 , pp. 33 - 38
Copyright
Copyright © 2008 National Institute of Economic and Social Research

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

References

Barrell, R. and Davis, E.P. (2005), ‘Policy design and macroeconomic stabillity in Europe’, National Institute Economic Review, 191, pp. 94–105.CrossRefGoogle Scholar
- (2007), ‘Financial liberalisation, consumption and wealth effects in 7 OECD countries’, Scottish Journal of Political Economy, May.Google Scholar
Barrell, R., Davis, E.P. and Pomerantz, O. (2006), ‘Costs of financial instability, household-sector balance sheets and consumption’, Journal of Financial Stability, 2, 2, pp. 194–216.Google Scholar
Barrell, R. and Holland, D. (2007), ‘Banking crises and economic growth’, National Institute Economic Review, 302, pp. 34–41.CrossRefGoogle Scholar
Barrell, R., Kirby, S. and Riley, R. (2004), ‘The current position of UK house prices’, National Institute Economic Review, 189, pp. 57–60.CrossRefGoogle Scholar
Englund, P. (1999), ‘The Swedish banking crisis: roots and consequences’, Oxford Review of Economic Policy, 15, 3.CrossRefGoogle Scholar
Greenlaw, D., Hatzius, L., Kashap, A. and Shin, H.S. (2008), ‘Leveraged losses: lessons from the mortgage market meltdown’, US Monetary Policy Forum, February.Google Scholar
IMF (2008), World Economic Outlook, April.Google Scholar
Kroszner, R., Laeven, L. and Klinggebiel, D. (2007), ‘Banking crises, financial dependence and growth’, Journal of Financial Economics, 84, pp.187–228.CrossRefGoogle Scholar
Nakaso, H. (2001), ‘The financial crisis in Japan during the 1990s: how the Bank of Japan responded and lessons learnt’, BIS Papers no. 6.Google Scholar
Ongena, S., Smith, D. and Michalsen, D. (2000), ‘Distressed relationships: lessons from the Norwegian banking crisis’, CFS Working paper no. 2000/01.Google Scholar