Veronica Guerrieri on adjusting from a regime of easy credit to one of tight credit
4,314 views · Published 15 February 2012 · 10:17 · Indexed 10 November 2026
Channel: The University of Chicago · 2012 · Education
Veronica Guerrieri, associate professor of economics at the University of Chicago Booth School of Business, discusses the "sharp contraction" that occurred following the late-2000s financial crisis. When the crisis hit, banks tightened lending and restricted consumers' credit. The pressure on households to repay debts quickly and save more right after a credit shock can lead to a large fall in consumption. The central bank may step in to boost consumption, but the recession that follows can be so deep that the central bank may not be able to bring interest rates down to the level where it can sufficiently stimulate spending. The fact that a credit crisis can lead the economy into a "liquidity trap" seems consistent with historical experience, as seen in Japan in the 1990s and in the US during the Great Depression. For more information, visit http://www.chicagobooth.edu/capideas/dec-2011/sharp-contraction.aspx ➡ Subscribe: http://bit.ly/UCHICAGOytSubscribe About #UChicago: Since its founding in 1890, the University of Chicago has been a destination for rigorous inquiry and field-defining research. This transformative academic experience empowers students and scholars to challenge conventional thinking in pursuit of original ideas. #UChicago on the Web: Home: http://bit.ly/UCHICAGO-homepage News: http://bit.ly/UCHICAGO-news Facebook: http://bit.ly/UCHICAGO-FB Twitter: http://bit.ly/UCHICAGO-TW Instagram: http://bit.ly/UCHICAGO-IG University of Chicago on YouTube: https://www.youtube.com/uchicago *** ACCESSIBILITY: If you experience any technical difficulties with this video or would like to make an accessibility-related request, please email [email protected].
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