Corporate Debt, Boom-Bust Cycles, and Financial Crises

65 Pages Posted: 11 Mar 2024

See all articles by Victoria Ivashina

Victoria Ivashina

Harvard University; National Bureau of Economic Research (NBER)

Ṣebnem Kalemli-Özcan

University of Maryland

Luc Laeven

European Central Bank (ECB); Centre for Economic Policy Research (CEPR)

Karsten Müller

National University of Singapore

Multiple version iconThere are 2 versions of this paper

Date Written: March 2024

Abstract

Using a new dataset on sectoral credit exposures covering financial and non-financial sectors in 115 economies over the period 1940–2014, we document the following evidence that corporate debt plays a key role in explaining boom-bust cycles, financial crises, and slow macroeconomic recoveries: (i) corporate debt accounts for two thirds of the aggregate credit expansion before crises and three quarters of total nonperforming loans during the bust; (ii) expansions in corporate debt predict crises similarly to household debt; (iii) a measure of imbalance in credit growth flowing disproportionately to some sectors, such as construction and non-bank financial intermediation, is associated with crises; and (iv) the recovery from financial crises is slower after a boom in corporate debt, especially when backed by procyclical collateral values, due to higher nonperforming loans.

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Suggested Citation

Ivashina, Victoria and Kalemli-Özcan, Ṣebnem and Laeven, Luc A. and Müller, Karsten, Corporate Debt, Boom-Bust Cycles, and Financial Crises (March 2024). NBER Working Paper No. w32225, Available at SSRN: https://ssrn.com/abstract=4754770

Victoria Ivashina (Contact Author)

Harvard University ( email )

Harvard Business School
Baker Library 233
Boston, MA 02163
United States

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Ṣebnem Kalemli-Özcan

University of Maryland ( email )

College Park
College Park, MD 20742
United States

Luc A. Laeven

European Central Bank (ECB) ( email )

Sonnemannstrasse 22
Frankfurt am Main, 60314
Germany

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Karsten Müller

National University of Singapore

15 Kent Ridge Dr
Singapore
Singapore

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