Economic Insights — By 2008, consumers and lenders had fallen in love with zero-APR credit card offers, but once Lehman Brothers collapsed, all that changed.
What exactly led to the Great Recession's persistent declines in employment and output? Economists still debate that question, but one key insight is that severed access to credit played a big role. To understand why, we need to take a closer look at the precipitous rise and (partial) fall of zero-APR credit card offers. Perhaps policymakers should keep an eye on promotional lending, and maybe even reserve a permanent spot for credit cards in their macroprudential policy considerations.
This article appeared in the Second Quarter 2021 edition of Economic Insights. Download and read the full issue.
