Household Debt, Corporate Debt, and the Real Economy: Some Empirical Evidence

51 Pages Posted: 22 Feb 2019

See all articles by Donghyun Park

Donghyun Park

Asian Development Bank - Economic Research

Kwanho Shin

Korea University

Grace Tian

Asian Development Bank

Date Written: December 18, 2018

Abstract

The rapid accumulation of private debt is widely viewed as a major risk to financial and economic stability. This paper systematically and comprehensively assesses the effect of private debt buildup on economic growth. In the spirit of Mian, Sufi, and Verner (2017) that separately examine the effects of two types of private debt, i.e., household debt and corporate debt, on growth in developed economies, this study specifically provides new evidence on the growth–private debt nexus in both advanced and emerging market economies (EMEs). Moreover, we construct financial peaks in terms of the speed of debt accumulation rather than crisis dates and find that in both advanced and EMEs, corporate debt buildups cause more financial peaks than household debt buildups. Further, corporate debt-induced financial recessions inflict a bigger damage on output than household debt-induced financial recessions in EMEs. Overall, our evidence suggests that policy makers would do well to closely monitor not only household debt but also corporate debt.

Keywords: business cycle, corporate debt, crisis, debt, economic growth, household debt, output, private debt

JEL Classification: E32, E44, G01

Suggested Citation

Park, Donghyun and Shin, Kwanho and Tian, Shu, Household Debt, Corporate Debt, and the Real Economy: Some Empirical Evidence (December 18, 2018). Asian Development Bank Economics Working Paper Series No. 567 (December, 2018). Available at SSRN: https://ssrn.com/abstract=3339193 or http://dx.doi.org/10.2139/ssrn.3339193

Donghyun Park (Contact Author)

Asian Development Bank - Economic Research ( email )

6 ADB Avenue, Mandaluyong City 1550
Metro Manila
Philippines

Kwanho Shin

Korea University ( email )

1 Anam-dong 5 ka
Sunbuk-Ku, Department of Economics
Seoul 136-701
Korea
82-2-3290-2220 (Phone)
82-2-3290-2719 (Fax)

HOME PAGE: econ.korea.ac.kr/~khshin

Shu Tian

Asian Development Bank ( email )

6 ADB Avenue, Mandaluyong City 1550
Metro Manila
Philippines

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