The political economy of credit cycles and their management

The present research project seeks to deepen the understanding of private credit cycles by analyzing the local political economy dynamics enabling or disabling the birth of destabilizing credit expansions. Which policy configurations and settings enable credit cycles to keep expanding unchecked and which enable countries to decisively act to tame those cycles? Chapter 1 presents the overall motivation for the research project by reviewing existing work and knowledge gaps. Chapter 2 tests the existence of political credit cycles around and beyond elections. Chapter 3 presents a new dataset of credit policies deepening the understanding of the actual policies that fuel or lean against credit cycles. Chapter 4 and 5 provide a more in-depth analysis of two crucial credit policy categories, each drawing credit in opposite directions: homeownership subsidization on the one hand and their impact on credit cycles (Chapter 4) and countercyclical macroprudential policy on the other hand, by analyzing the impact of governance arrangements on the capacity to restrain credit cycles (Chapter 5)