The Myth of Financial Innovation and the Great Moderation

Bibliographic Data

ID9705488
AuthorsWouter J Den Haan (University of Amsterdam and CEPR), Vincent Sterk (0000-0002-9098-8811, University of Amsterdam and De Nederlandsche Bank)
Year2011
Volume121
Issue553
Pages707-739
Publication date2011-06-01
Peer ReviewedYes
Open AccessYes
TypeARTICLE
VenueThe Economic Journal (JOURNAL)
Journal identifiersISSN: 0013-0133 • E-ISSN: 1468-0297
PublisherOxford University Press (OUP) (PUBLISHER)
DOI10.1111/j.1468-0297.2010.02400.x
OpenAlexW1508513229
LanguageEN
Citations received5
References cited10

Financial innovation is widely believed to be at least partly responsible for the recent financial crisis. At the same time, there are empirical and theoretical arguments that support the view that changes in financial markets, in particular, innovations in consumer credit and home mortgages, played a role in the great moderation. This article questions empirical evidence supporting this view. Especially the behaviour of aggregate home mortgages changed less during the great moderation than is typically believed. A remarkable change we do find is that monetary tightenings became episodes during which financial institutions other than banks increased their mortgages holdings

Debt · Economics · Great Moderation · Moderation · Mythology · Political science · Classics · Economic theories and models · Economic Theory and Policy · Finance · Global Financial Crisis and Policies · History · Psychology

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