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Begin New Search Topic Debt Author Moritz Schularick

1. Zombies at Large? Corporate Debt Overhang and the Macroeconomy

Author:
Oscar Jorda, Martin Kornejew, Moritz Schularick, and Alan Taylor
Publication Date:
11-2021
Content Type:
Working Paper
Institution:
Institute for New Economic Thinking (INET)
Abstract:
What are the macroeconomic consequences of business credit booms? Are they as dangerous as household credit booms? If not, why not? We answer these questions by collecting data on non- financial business liabilities (primarily bank loans and corporate bonds) for 17 advanced economies over the past 150 years. Unlike household credit, business credit booms are rarely followed by macroeconomic hangovers. Data on debt renegotiation costs—instrumented by a country’s legal tradition—show that frictions to debt resolution make recessions deeper and longer—an important factor in explaining the differences with household credit booms.
Topic:
Debt, Economics, Macroeconomics, and Corporations
Political Geography:
Global Focus

2. Modigliani Meets Minsky: Inequality, Debt, and Financial Fragility in America, 1950-2016

Author:
Alina K. Bartscher, Moritz Kuhn, Moritz Schularick, and Ulrike I. Steins
Publication Date:
04-2020
Content Type:
Working Paper
Institution:
Institute for New Economic Thinking (INET)
Abstract:
This paper studies the secular increase in U.S. household debt and its relation to growing income inequality and financial fragility. We exploit a new household-level dataset that covers the joint distributions of debt, income, and wealth in the United States over the past seven decades. The data show that increased borrowing by middle-class families with low income growth played a central role in rising indebtedness. Debt-to-income ratios have risen most dramatically for households between the 50th and 90th percentiles of the income distribution. While their income growth was low, middle-class families borrowed against the sizable housing wealth gains from rising home prices. Home equity borrowing accounts for about half of the increase in U.S. household debt between the 1970s and 2007. The resulting debt increase made balance sheets more sensitive to income and house price fluctuations and turned the American middle class into the epicenter of growing financial fragility.
Topic:
Debt, Finance, Income Inequality, and Economic Growth
Political Geography:
United States