What Is a Credit Boom

Credit booms – defined as periods of rapid credit growth – are a common phenomenon in both advanced and emerging economies (Mendoza and Terrones 2008, Bakker et al. 2012). They are generally accompanied by astrong macroeconomic performance, including high asset prices and high rates of investment and GDP growth.

What causes boom and bust?

Three forces combine to cause the boom and bust cycle. They are the law of supply and demand, the availability of financial capital, and future expectations. These three forces work together to cause each phase of the cycle. In the boom phase, strong consumer demand is the leading force.

What are the 4 stages of the business cycle?

The four stages of the cycle are expansion, peak, contraction, and trough. Factors such as GDP, interest rates, total employment, and consumer spending, can help determine the current stage of the economic cycle.