Inspecting the Mechanism: Leverage and the Great Recession in the Eurozone

Philippe Martin and Thomas Philippon ()

No 20572, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: We provide a comprehensive account of the dynamics of eurozone countries from 2000 to 2012. We analyze private leverage, fiscal policy, labor costs and interest rates and we propose a strategy to separate the impact of credit cycles, excessive government spending, and sudden stops. We then ask how eurozone countries would have fared with different policies. We find that most countries could have stabilized their employment if they had followed more conservative fiscal policies during the boom. Macro-prudential policies and an early intervention by the central bank to prevent market segmentation would also have significantly reduced the recession.

JEL-codes: E2 E3 E4 E6 F3 F4 (search for similar items in EconPapers)
Date: 2014-10
New Economics Papers: this item is included in nep-eec, nep-mac and nep-opm
Note: EFG IFM ME
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (26)

Published as Philippe Martin & Thomas Philippon, 2017. "Inspecting the Mechanism: Leverage and the Great Recession in the Eurozone," American Economic Review, vol 107(7), pages 1904-1937.

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Related works:
Journal Article: Inspecting the Mechanism: Leverage and the Great Recession in the Eurozone (2017)
Working Paper: Inspecting the Mechanism: Leverage and the Great Recession in the Eurozone (2017)
Working Paper: Inspecting the Mechanism: Leverage and the Great Recession in the Eurozone (2017)
Working Paper: Inspecting the Mechanism: Leverage and the Great Recession in the Eurozone (2014)
Working Paper: Inspecting the Mechanism Leverage and the Great Recession in the Eurozone (2014)
Working Paper: Inspecting the Mechanism Leverage and the Great Recession in the Eurozone (2014)
Working Paper: Inspecting the Mechanism Leverage and the Great Recession in the Eurozone (2014)
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