Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/212341 
Year of Publication: 
2016
Series/Report no.: 
Bank of Finland Research Discussion Papers No. 3/2016
Publisher: 
Bank of Finland, Helsinki
Abstract: 
In addition to leverage, the debt service burden of households and firms is an important link between financial and real developments at the aggregate level. Using US data from 1985 to 2013, we find that the debt service burden has sizeable negative effects on expenditure. Its interplay with leverage also explains several data puzzles, such as the lack of above-trend output growth during credit booms and the depth and length of ensuing recessions, without appealing to large shocks or non-linearities. Using data up to 2005, our model predicts paths for credit and expenditure that closely match actual developments before and during the Great Recession.
JEL: 
E20
E32
E44
G01
Persistent Identifier of the first edition: 
ISBN: 
978-952-323-098-9
Document Type: 
Working Paper

Files in This Item:
File
Size





Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.