 Anatomy of credit-less recoveriesLuisa Corrado and Isolina Rossi Journal of Macroeconomics, 2019, vol. 62, issue C Abstract: The recovery from the global crisis that erupted in 2007 shows that the decoupling between real and financial variables during the business cycle can lead to negative and long-lasting consequences for the economy. A key feature of the past global crisis in many countries is that the recovery in aggregate output has not been accompanied by a contemporary pick-up in lending flows to the private sector, rendering the recovery credit-less. This paper uses data on output and credit to study the relative roles of demand and supply drivers of credit growth during economic recoveries on a sample of advanced and emerging countries between 1980 and 2014. Using a simple endowment economy model, the paper shows that credit-less recoveries are correlated with liquidity shocks in real and financial markets and with the pace of private sector deleveraging. The empirical analysis shows that during these episodes demand-side frictions played a relatively larger role in predicting the occurrence of the episodes, reflecting weak demand for liquidity by the private sector in the aftermath of the crisis. Keywords: Credit-less recoveries; Liquidity; Probit models (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:jmacro:v:62:y:2019:i:c:s0164070418305238 DOI: 10.1016/j.jmacro.2019.103152 Access Statistics for this article Journal of Macroeconomics is currently edited by Douglas McMillin and Theodore Palivos More articles in Journal of Macroeconomics from Elsevier |
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