Arbeitspapier
When credit bites back: Leverage, business cycles and crises
This paper studies the role of credit in the business cycle, with a focus on private credit overhang. Based on a study of the universe of over 200 recession episodes in 14 advanced countries between 1870 and 2008, we document two key facts of the modern business cycle: financial-crisis recessions are more costly than normal recessions in terms of lost output; and for both types of recession, more credit-intensive expansions tend to be followed by deeper recessions and slower recoveries. In additional to unconditional analysis, we use local projection methods to condition on a broad set of macroeconomic controls and their lags. Then we study how past credit accumulation impacts the behavior of not only output but also other key macroeconomic variables such as investment, lending, interest rates, and inflation. The facts that we uncover lend support to the idea that financial factors play an important role in the modern business cycle.
- Language
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Englisch
- Bibliographic citation
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Series: Working Paper ; No. 12-24
- Classification
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Wirtschaft
Semiparametric and Nonparametric Methods: General
Model Evaluation, Validation, and Selection
Money Supply; Credit; Money Multipliers
Current Account Adjustment; Short-term Capital Movements
International Policy Coordination and Transmission
Economic History: Macroeconomics and Monetary Economics; Industrial Structure; Growth; Fluctuations: General, International, or Comparative
Economic History: Financial Markets and Institutions: General, International, or Comparative
- Subject
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leverage
booms
recessions
financial crises
business cycles
local projections
- Event
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Geistige Schöpfung
- (who)
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Jordà, Òscar
Schularick, Moritz
Taylor, Alan
- Event
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Veröffentlichung
- (who)
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University of California, Department of Economics
- (where)
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Davis, CA
- (when)
-
2012
- Handle
- Last update
-
10.03.2025, 11:41 AM CET
Data provider
ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften - Leibniz-Informationszentrum Wirtschaft. If you have any questions about the object, please contact the data provider.
Object type
- Arbeitspapier
Associated
- Jordà, Òscar
- Schularick, Moritz
- Taylor, Alan
- University of California, Department of Economics
Time of origin
- 2012
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Identifying excessive credit growth and leverage
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