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Household and Business Debt: A Fire-Sale Risk Analysis

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Abstract

As of year-end 2019, nonfinancial business debt (BD) and household debt (HD) as a share of GDP were at similar levels of around 74 percent, and yet Federal Reserve Financial Stability Report suggested that BD posed greater risks to financial stability than HD. Since the onset of the pandemic, the size of aggregate BD has increased considerably as a result of roughly $1.25 trillion of new issuance, while HD has grown by less than $100 billion. This note looks through the lens of fire-sale risks to show why nonfinancial BD is more concerning for financial stability than the HD.

Suggested Citation

  • Fang Cai & Gene Kang & Gazi I. Kara & Nathan Swem & Filip Zikes, 2021. "Household and Business Debt: A Fire-Sale Risk Analysis," FEDS Notes 2021-02-01-1, Board of Governors of the Federal Reserve System (U.S.).
    • Handle: RePEc:fip:fedgfn:2021-02-01-1
    DOI: 10.17016/2380-7172.2625
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    File URL: https://www.federalreserve.gov/econres/notes/feds-notes/household-and-business-debt-a-fire-sale-risk-analysis-20210201.htm
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