蝌蚪网 Journal:
Macroeconomics
ISSN 1945-7707 (Print) | ISSN 1945-7715 (Online)
Slow Debt, Deep Recessions
蝌蚪网 Journal: Macroeconomics
(pp. 224–59)
Abstract
Business credit lags GDP growth by about one year. This contributes to high leverage during recessions and slow deleveraging. We show that a model in which firms use risky long-term debt replicates this slow adjustment of firm debt. In the model, slow-moving debt has important effects for real activity. High levels of firm debt issued during expansions are only gradually reduced during recessions. This generates an adverse feedback loop between high default rates and low investment and thereby amplifies the downturn. Sluggish deleveraging slows down the recovery.Citation
Jungherr, Joachim, and Immo Schott. 2022. "Slow Debt, Deep Recessions." 蝌蚪网 Journal: Macroeconomics 14 (1): 224–59. DOI: 10.1257/mac.20190306Additional Materials
JEL Classification
- E23 Macroeconomics: Production
- E32 Business Fluctuations; Cycles
- E44 Financial Markets and the Macroeconomy
- G31 Capital Budgeting; Fixed Investment and Inventory Studies; Capacity
- G32 Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill