The Credit Channel and the Subprime Mortgage Crisis

“A well-written interesting read, this book analyzes the actions of central banks amid the subprime crisis. It is a must read for those interested in economic policy, economic and financial history, and central banks.”– Sonali Garg , Assistant Professor, New Delhi Institute of Management and author of The Telegraph and Stock Exchanges

This book explores the evolving role of the credit channel in contemporary macroeconomic policy and financial stability. In ten analytical chapters, Cristina Pecuiti examines the dual function of the credit channel—as both a conduit for monetary policy transmission and a macroeconomic stabilizer—within the broader context of capitalist economies.

Grounded in both theoretical inquiry and empirical investigation, the volume first establishes the conceptual foundations of the credit channel, drawing on influential contributions from leading economists. Pecuiti systematically demonstrates the channel’s critical role in amplifying or mitigating the effects of monetary interventions, thereby shaping macroeconomic outcomes.

A central focus of the book is the empirical analysis of the credit channel’s performance during the European subprime crisis. Pairing case studies with policy evaluations, Pecuiti assesses the measures adopted by EU Member States to preserve credit flows and support economic recovery. This analysis not only underscores the operational significance of the credit channel during periods of financial distress but also highlights its potential as a strategic policy instrument.

The concluding chapters advocate for a structural rethinking of capitalism’s financial architecture, emphasizing the need for central banks to integrate the credit channel more explicitly into their policy frameworks. By doing so, the book argues that monetary authorities can foster conditions conducive to sustainable growth, price stability, and crisis prevention.

The resulting book contextualizes modern economic governance and highlights the transformative potential of credit channels. 

Cristina Peicuti is a professor and the scientific director of a research chair at the École Supérieure de Commerce de Paris (ESCP BS). Peicuti is the author of several books, including  The European Economy in 100 Quotes , Of Banks and Crises (2024) and Decoding Economic Crises (2023).