Predicting Financial Crises: How Credit Growth and Asset Prices Signal Trouble
Financial crises have big negative effects on the economy. Researchers have looked at how to measure and predict these crises. They found that crises can be predicted by looking at credit growth and high asset prices. People's behavior also plays a big role in predicting crises. The bad effects of a crisis come from the crisis itself and from problems before it. Crises don't happen randomly, so we need to understand the economic booms that come before them.