Private and Public Debt : Are Emerging Markets at Risk?

Using a dataset covering a large sample of emerging economies (EMEs), westudy the relationship between debt and economic performance in bad times.While previous research has shown that private debt buildups exacerbate theduration and intensity of recessions in advanced economies (AEs), we documentthat this effect is very pronounced in EMEs as well. Moreover, although rapidpublic debt buildups are unlikely to be the primary trigger of financial crises,in EMEs they are associated with deeper and longer recessions than in AEs.Part of this difference is explained by a less supportive fiscal policy in EMEsduring crises