Moritz Schularick

Professor of Economics and Economic History
John F. Kennedy Institute of the Free University of Berlin

Moritz Schularick is professor of economics at the John F. Kennedy Institute of the Free University of Berlin, Germany. He has also been a visiting scholar at Cambridge University and worked in the financial industry for several years. His current work focuses on credit cycles, the determinants of financial crises, and the international monetary system. Together with Niall Ferguson, he coined the term “Chimerica” to describe the intimate financial relations between the United States and China. Working at the crossroads of monetary and international economics as well as economic history, his contributions can be found in the American Economic Review, the Review of Economics and Statistics, the Journal of Economic Growth, the Journal of Economic History, and several other journals.

My Content

Two separate narratives have emerged in the wake of the Global Financial Crisis. One interpretation speaks of private financial excess and the key role of the banking system in leveraging and deleveraging the economy. The other emphasizes the public sector balance sheet over the private and worries about the risks of lax fiscal policies. However, the two may interact in important and understudied ways. This paper examines the co-evolution of public and private sector debt in advanced countries since 1870. We find that in advanced economies significant financial stability risks have mostly come from private sector credit booms rather than from the expansion of public debt.

This paper tracks the development of sectoral saving and borrowing in the US economy over the past 50 years. We show that the financial imbalances that erupted in the financial crisis of 2008 were long in the making and preceded the emergence of global imbalances in the 2000s. The record low household savings rate in the past decade was the product of two separate trends: a sharp fall in the asset acquisition of American households in the 1990s, and an explosion of mortgage borrowing in the 2000s. We present novel disaggregated estimates of the wealth effect on savings. We show that households reduce active savings in response to gains in financial wealth and increase borrowing with rising housing wealth.

My Video Content

See video

Moritz Schularick, Professor of Economics and Economic History, Free University of Berlin speaking at the breakout panel entitled "Instability in Financial Markets: Sources and Remedies" at the Institute for New Economic Thinking's (INET) Paradigm Lost Conference in Berlin. April 14, 2012. #inetberlin

See video

Discussion and Q&A at the panel entitled "Managing the Global Commons: Growth, Inequality, and New Thinking for Sustainable Economics" at the Institute for New Economic Thinking's (INET) Paradigm Lost Conference in Berlin. April 14, 2012. #inetberlin

See video

About the Interview

Carmen Reinhart and Kenneth Rogoff tell the history of financial crisis as a tale of excessive public debt. But what more commonly drives financial instability, says Moritz Schularick, is excessive private debt. Financial crises are credit booms gone bust. Schularick and his collaborators compile a long-run data set of disaggregated credit flows, separating loans for productive investment from loans for the purchase of existing assets. A marriage of economic history and modern statistical methods to investigate the role of finance in the macroeconomy -- this is new economic thinking.

My Grants

The widely held belief that financial deepening benefits the economy by efficiently allocating capital and diversifying risk was shaken to its core by the breadth and scope of the 2008/09 financial crisis. Advanced economies saw a steady increase in financial intensity, measured by the volume of credit to output, since the Second World War. But as the tremendous costs of the last crisis are still being tallied, doubtful questions naturally arise: Was it worth it? What where the benefits of the remarkable growth of leverage and credit in the last three decades? Was finance promoting growth or was financialization of the economy allowed to proceed to unsustainable, inefficient, and ultimately destabilizing levels?