Economics, Econometrics and Finance
4 years ago

Household and firm debt dynamics shape economic fluctuations in new model.

MPRA Paper
Firm leverage, household leverage and the business cycle
Bernard Daniel Solomon

Paper Summary

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The article explores how consumer and firm debt interact during economic ups and downs. By studying US data, the researchers found that credit market issues affect investment but not overall output. Household loan costs can influence firm loan costs, and productivity shocks play a big role in economic fluctuations. Financial problems only explain a small part of output changes.