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Private and Public Debt: Are Emerging Markets at Risk?
Author: Marco Bernardini and Lorenzo Forni
Series:
IMF Working Papers
Volume/Issue:
Volume 2017: Issue 061
Language:
English
Publication Date:
22 Mar 2017
DOI:
https://doi.org/10.5089/9781475588170.001
ISBN:
9781475588170
ISSN:
1018-5941
Pages:
38
Keywords:
WP; financial crisis; government spending; private-public debt; recessions; banking crises; emerging markets; debt buildup; debt accumulation; debt-recession cycle; accumulation matter; Private debt; Global
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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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Using a dataset covering a large sample of emerging economies (EMEs), we study the relationship between debt and economic performance in bad times. While previous research has shown that private debt buildups exacerbate the duration and intensity of recessions in advanced economies (AEs), we document that this effect is very pronounced in EMEs as well. Moreover, although rapid public debt buildups are unlikely to be the primary trigger of financial crises, in EMEs they are associated with deeper and longer recessions than in AEs. Part of this difference is explained by a less supportive fiscal policy in EMEs during crises.
Cover IMF Working Papers
IMF Working Papers
ISSN:
1018-5941
Publisher:
International Monetary Fund