Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/234945 
Year of Publication: 
2021
Series/Report no.: 
BoF Economics Review No. 2/2021
Publisher: 
Bank of Finland, Helsinki
Abstract: 
We analyze the relationship of the distribution of future GDP growth and accumulation of household debt in Finnish macroeconomic data from 1980 to 2019. We find clear evidence that exuberant accumulation of household debt is related to the thickening of the left tail of the future growth distribution, while reaction in the right tail of the distribution is more damped. Thus, there is a link between rapid household debt growth and increase in probabilities of more severe downturns. We also re-establish the result of Mian, Sufi, and Verner (2017) that, on average, rapid household debt accumulation is associated with slower subsequent economic growth. While the relationship of the debt growth and negative tail effects is robust along our sample period, the association between debt growth and median of the GDP growth distribution varies from significantly negative to zero, depending on the estimation sample and especially if the Finnish Great Depression of early 1990's is included.
Subjects: 
household debt
GDP forecasting
quantile regression
JEL: 
E44
E47
G51
Persistent Identifier of the first edition: 
Document Type: 
Research Report

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