Private sector credit growth has averaged less than 3% in the UK, US and the euro area over the past decade, generally less than nominal GDP growth. Aggregate debt servicing ratios are below historic averages, in part due to low equilibrium interest rates. Although there are pockets of risk, heat maps that mechanically bring together several credit measures remain relatively cool overall (Chart 7) – though aggregates can hide important pockets of risk that can amplify negative shocks, and, as I’ll discuss, it is a different picture for China. See Reinhart, C, Rogoff, K, (2010), Growth in a Time of Debt, American Economic Review. For example, see Bridges, J, Jackson, C, McGregor, D (2017) Down in the slumps: the role of credit in five decades of recessions, Bank of England Staff Working Paper N. 659; Borio, C, Drehmann, M, Xia, D (2018) The financial cycle and recession risk, BIS quarterly review; Taylor, A, Schularick, M (2012) Credit Booms Gone Bust: Monetary Policy, Leverage Cycles, and Financial Crises, 1870-2008, American Economic Review; Aikman, D, Bridges, J, Kashyap, A, Siegart, C (2018) Would macroprudential regulation have prevented the last crisis?, Bank of England Staff Working Paper N. 747. 15 There are various definitions of a credit boom in the empirical literature – for a brief summary see Gorton, G, Ordoñez, G (2019), Good Booms, Bad Booms, forthcoming in the Journal of the European Economic Association.
Pablo Hernández de Cos: Closing ceremony of the academic year 2022-2023 Speech by Mr Pablo Hernández de Cos, Governor of the Bank of Spain, at the Center for Monetary and Financial Studies (CEMFI) , Santander, 30 June 2023. *** Good afternoon dear colleagues and friends. And good afternoon class of 2023. It is a pleasure for me to participate in this graduation ceremony, together with Rafael Repullo, long-standing Director of CEMFI, and Nezih Guner, who is due to take over from him in September. As such, this graduation ceremony is special. Indeed, very special. Because it will be the last one with Rafael Repullo as Director. After 36 years of service, he is going to step down, to be replaced by Nezih Guner. At the same time, the Deputy Directors Manuel Arellano and Samuel Bentolila will also step down, to be replaced by Mónica Martínez-Bravo. I would like to thank Rafael, Manuel and Samuel for "Making a Miracle" to use the title of a famous paper published in 1993 by the Nobel laureate Robert Lucas. While Lucas was referring to episodes of very rapid income growth in Asian countries, I would like to draw attention to the miracle of their transformation of a small venture at the Banco de España's Training Centre into one of the top European graduate schools for economics and finance. I would also like to take this opportunity to thank Nezih and Mónica for accepting the challenge of taking this great institution forward.