Sustainable Financial Obligations and Crisis Cycles
AbstractThe ability to distinguish between sustainable and excessive debt developments is crucial for securing economic stability. By studying US private sector credit loss dynamics, we show that this distinction can be made based on a measure of the incipient aggregate liquidity constraint, the financial obligations ratio. Specifically, as this variable rises, the interaction between credit losses and the business cycle increases, albeit with different intensity depending on whether the problems originate in the household or the business sector. This occurs 1–2 years before each recession in the sample. Our results have implications for macroprudential policy and countercyclical capital-buffers. View Full-Text
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Juselius, M.; Kim, M. Sustainable Financial Obligations and Crisis Cycles. Econometrics 2017, 5, 27.
Juselius M, Kim M. Sustainable Financial Obligations and Crisis Cycles. Econometrics. 2017; 5(2):27.Chicago/Turabian Style
Juselius, Mikael; Kim, Moshe. 2017. "Sustainable Financial Obligations and Crisis Cycles." Econometrics 5, no. 2: 27.
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