Credit subsidies can counteract bust cycles: IMF paper

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Credit subsidies helped to mitigate the slump in output and were used to buffer the impact of the global financial crisis in Serbia, according to an International Monetary Fund paper, published on Tuesday.

Jiri Podpiera, the paper's author, uses a simple, calibrated model with a financial accelerator to gauge the effectiveness of countercyclical credit subsidies, drawing on a rare policy experiment in Serbia. Podpiera says that while the policy debate on how to respond to boom-bust credit cycles

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