@article{98daef73f5d649158d30600f3ee952b8,
title = "Household debt and business cycles worldwide",
abstract = "An increase in the household debt to GDP ratio predicts lower GDP growth and higher unemployment in the medium run for an unbalanced panel of 30 countries from 1960 to 2012. Low mortgage spreads are associated with an increase in the household debt to GDP ratio and a decline in subsequent GDP growth, highlighting the importance of credit supply shocks. Economic forecasters systematically overpredict GDP growth at the end of household debt booms, suggesting an important role of flawed expectations formation. The negative relation between the change in household debt to GDP and subsequent output growth is stronger for countries with less flexible exchange rate regimes. We also uncover a global household debt cycle that partly predicts the severity of the global growth slowdown after 2007. Countries with a household debt cycle more correlated with the global household debt cycle experience a sharper decline in growth after an increase in domestic household debt.",
author = "Atif Mian and Amir Sufi and Emil Verner",
note = "Funding Information: ∗This research was supported by funding from the Initiative on Global Markets at Chicago Booth, the Fama-Miller Center at Chicago Booth, and Princeton University. We thank Giovanni Dell{\textquoteright}Ariccia, Andy Haldane, {\`O}scar Jord{\`a}, Anil Kashyap, Guido Lorenzoni, Virgiliu Midrigan, Emi Nakamura, Jonathan Parker, Chris Sims, Andrei Shleifer, Paolo Surico, Alan Taylor, Giancarlo Corsetti, Jeremy Stein, Larry Katz, Robert Vishny, four anonymous referees, and seminar participants at Princeton University, Chicago Booth, Northwestern University, Harvard University, NYU, NYU Abu Dhabi, UCLA, UT-Austin, the Swedish Riks-bank conference on macro-prudential regulation, Danmarks Nationalbank, the Central Bank of the Republic of Turkey, Wharton, the Bank of England, Copenhagen Business School, the European Central Bank, the Nova School of Business and Economics, the NBER Monetary Economics meeting, the NBER Lessons from the Crisis for Macroeconomics meeting, and NBER Summer Institute for helpful comments. Elessar Chen and Seongjin Park provided excellent research assistance. Publisher Copyright: {\textcopyright} The Author(s) 2017. Published by Oxford University Press, on behalf of President and Fellows of Harvard College. All rights reserved.",
year = "2017",
month = nov,
day = "1",
doi = "10.1093/qje/qjx017",
language = "English (US)",
volume = "132",
pages = "1755--1817",
journal = "Quarterly Journal of Economics",
issn = "0033-5533",
publisher = "Oxford University Press",
number = "4",
}