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Private Sector Deleveraging and Growth Following Busts
Author:
Ms. Sally Chen
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,
Minsuk Kim
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,
Marijn Otte
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,
Kevin Wiseman
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Ms. Aleksandra Zdzienicka
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Series:
IMF Working Papers
Volume/Issue:
Volume 2015: Issue 035
Language:
English
Publication Date:
23 Feb 2015
DOI:
https://doi.org/10.5089/9781498333405.001
ISBN:
9781498333405
ISSN:
1018-5941
Pages:
37
Keywords:
WP; debt; private sector; financial crisis; economy; deleveraging; leverage cycles; financial cycles; growth; private sector debt; debt ratio; household debt; government debt threshold; leverage ratio; demand support; Private debt; Financial statements; Production growth; Global
Legal-disclaimer:
IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.
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Balance sheet recessions have been a drag on activity after the Global Financial Crisis, underscoring the important role of balance sheet adjustment for resuming sustained growth. In this paper we examine private sector deleveraging experiences across 36 advanced and emerging economies countries since 1960. We consider the common features and divergent experiences of deleveraging episodes across countries, and analyze empirically the impact of different aspects of deleveraging during the bust phase of leverage cycles on subsequent medium-term growth. The results suggest that larger and quicker unwinding of non-financial sector debt overhangs is associated with sizable medium-term output gains, and that policies should focus on facilitating up-front balance sheet adjustment.
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Cover IMF Working Papers
IMF Working Papers
ISSN:
1018-5941
Publisher:
International Monetary Fund