Fed paper investigates shackling credit-fuelled booms

federal reserve

A Federal Reserve Bank of San Francisco working paper, published on August 16, explores how supervisory authorities can restrain booms fuelled by easy credit and rising debt to prevent the financial imbalances that can follow.

The authors, Paolo Gelain, Kevin Lansing and Caterina Mendicino, expand standard dynamic stochastic general equilibrium models by introducing excess volatility to study the irrational movement of macroeconomic variables in their research. They found that a loan-to-income

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