Finance, Crisis and Growth

This article studies the links between the financial sector and macroeconomic performances. The focus of the study is on the distinction between the short-run effects, associated to cycles and crisis, and the long-run effects, associated to economic growth.

After presenting these different effects, the authors show how the concept of hysteresis allows to analyze the interactions between them. In particular, they show that if a higher growth of financial activity comes together with a stronger economic growth during one cycle, it reduces economic growth for future cycles because of the hysteresis phenomenon.