A1004
Title: Long waves in external imbalances, credit growth and asset prices: An historical perspective on global financial crisis
Authors: Marco Gallegati - Polytechnic University of Marche (Italy) [presenting]
Abstract: The recent global financial crisis has favored a renewed interest in the long run view of macroeconomic history and in Minsky's contributions on the role the instability of the financial structure for the economy. We use a long-term historical dataset to investigate the timing relationships among long wave patterns in external imbalances, credit growth and asset prices. We document evidence of a recurring sequencing pattern ahead of global crisis periods where credit booms are preceded by growing external imbalances, and financial crisis occur at the low end of the contraction phase of asset price returns. The main implications of our results are the need to pay attention to widening global imbalances and to regulate and reform the financial sector by limiting capital markets movements.
