Sovereigns versus Banks: Credit, Crises, and Consequences

Oscar Jorda, Moritz Schularick and Alan Taylor

No 2013-37, Working Paper Series from Federal Reserve Bank of San Francisco

Abstract: Two separate narratives have emerged in the wake of the Global Financial Crisis. One speaks of private financial excess and the key role of the banking system in leveraging and deleveraging the economy. The other emphasizes the public sector balance sheet over the private and worries about the risks of lax fiscal policies. However, the two may interact in important and understudied ways. This paper studies the co-evolution of public and private sector debt in advanced countries since 1870. We find that in advanced economies financial stability risks have come from private sector credit booms and not from the expansion of public debt. However, we find evidence that high levels of public debt have tended to exacerbate the effects of private sector deleveraging after crises, leading to more prolonged periods of economic depression. Fiscal space appears to be a constraint in the aftermath of a crisis, then and now.

Keywords: leverage; booms; recessions; financial crises; business cycles; local projections (search for similar items in EconPapers)
JEL-codes: C14 C52 E51 F32 F42 N10 N20 (search for similar items in EconPapers)
Pages: 44 pages
Date: 2013
New Economics Papers: this item is included in nep-ban, nep-cba, nep-his and nep-opm
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (20)

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Related works:
Journal Article: SOVEREIGNS VERSUS BANKS: CREDIT, CRISES, AND CONSEQUENCES (2016)
Journal Article: Sovereigns Versus Banks: Credit, Crises, and Consequences (2016)
Working Paper: Sovereigns versus Banks: Credit, Crises and Consequences (2014)
Chapter: Sovereigns versus Banks: Credit, Crises, and Consequences (2013)
Working Paper: Sovereigns versus Banks: Credit, Crises, and Consequences (2013)
Working Paper: Sovereigns versus Banks: Credit, Crises, and Consequences (2013)
Working Paper: Sovereigns versus Banks: Credit, Crises, and Consequences (2013)
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Persistent link: https://EconPapers.repec.org/RePEc:fip:fedfwp:2013-37

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DOI: 10.24148/wp2013-37

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