with Alan Taylor and Oscar Jorda — American Economic Review, Vol. 102, Issue 2, pp. 1029-61.
We study the behavior of money, credit, and macroeconomic indicators over the long run based on a new historical dataset for 14 countries over the years 1870-2008. Total credit has increased strongly relative to output and money in the second half of the twentieth century. Credit growth is a powerful predictor of financial crises, suggesting that policymakers ignore credit at their peril.