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Nobel Lecture: Banking, Credit, and Economic Fluctuations

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  • Ben S. Bernanke

Abstract

Credit markets, including the market for bank loans, are characterized by imperfect and asymmetric information. These informational frictions can interact with other economic forces to produce periods of credit-market stress, in which intermediation is unusually costly and households and businesses have difficulty obtaining credit. A high level of credit-market stress, as in a severe financial crisis, may in turn produce a deep and prolonged recession. I present evidence that financial distress and disrupted credit markets were important sources of the Great Depression of the 1930s and the Great Recession of 2007–2009. Changes in the state of credit markets also play a role in "garden-variety" business cycles and in the transmission of monetary policy to the economy.

Suggested Citation

  • Ben S. Bernanke, 2023. "Nobel Lecture: Banking, Credit, and Economic Fluctuations," American Economic Review, American Economic Association, vol. 113(5), pages 1143-1169, May.
    • Handle: RePEc:aea:aecrev:v:113:y:2023:i:5:p:1143-69
    DOI: 10.1257/aer.113.5.1143
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    Citations

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    Cited by:

    1. Chiara Scotti, 2023. "Financial Shocks in an Uncertain Economy," Working Papers 2308, Federal Reserve Bank of Dallas.
    2. Ihtisham ul Haq & Shavkat Otamurodov & Khurram Abbas & Aisha Nowshid Khan, 2024. "Financial Innovation and Sustainable Development in Pakistan: An Empirical Study," International Journal of Energy Economics and Policy, Econjournals, vol. 14(2), pages 402-409, March.
    3. Bo Li, 2024. "Household Leverage Cycle Around the Great Recession," Papers 2407.01539, arXiv.org.
    4. Bo Li, 2024. "Testing Business Cycle Theories: Evidence from the Great Recession," Papers 2403.04104, arXiv.org.
    5. Carayannis, Elias G. & Vincenzi, Marco & Draper, John, 2024. "The economic logic of open science in fusion energy research: A policy perspective," Energy Policy, Elsevier, vol. 186(C).
    6. Li, Boyao, 2024. "A balance sheet analysis of monetary policy effects on banks," MPRA Paper 120882, University Library of Munich, Germany.

    More about this item

    JEL classification:

    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • N22 - Economic History - - Financial Markets and Institutions - - - U.S.; Canada: 1913-

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