Research Newsletter Online 4/2009



By definition, a ‘credit crunch’, also known as a ‘credit squeeze’, ‘financial crunch’ or even ‘credit crisis’, is a reduction in the general availability of loans (credit) or a sudden tightening of the conditions required to obtain a loan from the banks or, more generally, from financial institutions. Consequently, a credit crunch generally involves a reduction in the availability of credit independent of a rise in interest rates. This, in turn, implies that in such situations the relationship between credit availability and interest rates has, perhaps for reasons unknown, changed so that either credit becomes less available at given official interest rates or a clear relationship between interest rates and credit availability vanishes. The latter possibility essentially reflects credit rationing.
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Financial factors and aggregate fluctuations

The current crisis will most likely put additional pressure on future macroeconomic research to actively seek ways to incorporate financial frictions and financial market imperfections into mainstream macroeconomic models. To contribute to these research efforts and, at the same time, take stock of the new literature on financial factors and aggregate fluctuations, particularly those contributions that work on issues related to credit crunches, the 10th joint annual BoF-CEPR conference, Credit Crunch and the Macroeconomy, co-organized this time by Cass School (London), focused on these timely questions. The one and a half day conference brought together researchers from many countries and institutions to discuss and debate the topic.
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Monetary policy rules in emerging economies

In emerging economies, implementation of monetary policy does not always seem to be in line with the officially announced monetary policy strategy. There may be simple reasons for this: the central bank may have limited independence with respect to monetary policy, there may be a limited number of instruments available or the money markets may be underdeveloped. We can, however, use empirical research to identify central banks’ implicit responses to developments in the economy. Many emerging markets have substantially improved their institutions since the crises of the early 1990s. This makes it interesting to examine whether the rules employed in analysing developed economies’ monetary policies can also be applied to analysing the monetary policies pursued in emerging economies.
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Recent Bank of Finland research publications
Forthcoming publications



Jouko Vilmunen

Bank of Finland
ISSN 1796-9131

PO Box 160,
FI–00101 Helsinki


Research Newsletter 4/2009 (PDF)