Abstract
The composition of private debt matters to the severity of post-2007 recessions. Using new data on four
types of bank credit over 2000-2012 for 51 economies in OLS and Bayesian averaging models, we find
that changes in the share of household mortgage credit in total credit before the crisis are significantly
associated with recession depth and growth loss after the 2007 crisis. This finding is robust to a wide range
of control variables and to the different responses across advanced and emerging economies. The evidence
also suggests that mortgage growth combined with increasing bank leverage was particularly damaging
to output growth. We discuss policy implications and future research.
types of bank credit over 2000-2012 for 51 economies in OLS and Bayesian averaging models, we find
that changes in the share of household mortgage credit in total credit before the crisis are significantly
associated with recession depth and growth loss after the 2007 crisis. This finding is robust to a wide range
of control variables and to the different responses across advanced and emerging economies. The evidence
also suggests that mortgage growth combined with increasing bank leverage was particularly damaging
to output growth. We discuss policy implications and future research.
| Original language | English |
|---|---|
| Publisher | SOM Research Report |
| Number of pages | 25 |
| Volume | 15009-GEM |
| Publication status | Published - 2015 |
Keywords
- private credit
- mortgages
- crisis
- output loss