Corporate Debt, Boom-Bust Cycles, and Financial Crises

Victoria Ivashina, Sebnem Kalemli-Ozcan, Luc Laeven and Karsten Müller

No 32225, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: Using a new dataset on sectoral credit exposures in 114 economies from 1940 to 2014, we provide evidence that corporate debt plays a key role in explaining macroeconomic boom-bust cycles, financial crises, and sluggish recoveries. We find that: (i) corporate debt accounts for two-thirds of aggregate credit expansion and three-quarters of nonperforming loans during downturns; (ii) firm credit growth is linked to future crises more so when it is backed by pro-cyclical collateral; (iii) expansions in corporate debt predict crises, conditional on expansions in household credit; (iv) increasing dispersion in corporate credit also predicts financial crises, consistent with heterogeneous firm financial frictions; (v) financial crises following booms in corporate debt are associated with slower macro recoveries.

JEL-codes: E30 F34 (search for similar items in EconPapers)
Date: 2024-03
New Economics Papers: this item is included in nep-ban, nep-cfn, nep-fdg, nep-his and nep-opm
Note: CF EFG IFM
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Working Paper: Corporate Debt, Boom-Bust Cycles, and Financial Crises (2024)
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