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Private credit and public debt in financial crises

Author

Listed:
  • Jorda, Oscar

    () (Federal Reserve Bank of San Francisco)

  • Schularick, Moritz

    (University of Bonn)

  • Taylor, Alan M.

    (University of California, Davis)

Abstract

Recovery from a recession triggered by a financial crisis is greatly influenced by the government’s fiscal position. A financial crisis puts considerable stress on the government’s budget, sometimes triggering attacks on public debt. Historical analysis shows that a private credit boom raises the odds of a financial crisis. Entering such a crisis with a swollen public debt may limit the government’s ability to respond and can result in a considerably slower recovery.

Suggested Citation

  • Jorda, Oscar & Schularick, Moritz & Taylor, Alan M., 2014. "Private credit and public debt in financial crises," FRBSF Economic Letter, Federal Reserve Bank of San Francisco.
  • Handle: RePEc:fip:fedfel:00009
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    File URL: http://www.frbsf.org/economic-research/publications/economic-letter/2014/march/private-credit-public-debt-financial-crisis/el2014-07.pdf
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    Cited by:

    1. Mattia Guerini & Alessio Moneta & Mauro Napoletano & Andrea Roventini, 2017. "The Janus-faced nature of debt : result from a data-driven cointegrated SVAR approach," Documents de Travail de l'OFCE 2017-02, Observatoire Francais des Conjonctures Economiques (OFCE).
    2. Nicoletta Batini & Giovanni Melina & Stefania Villa, 2016. "Fiscal Buffers, Private Debt, and Stagnation; The Good, the Bad and the Ugly," IMF Working Papers 16/104, International Monetary Fund.

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