This paper empirically investigates the relationship between the speed of buildup of private debt (household and corporate) and the depth of recessions. To do this, we differentiate between financial recessions and normal recessions on the basis of how quickly their private debt builds up. In...

A measure of the degree of debt monetisation is constructed for its impact on the business cycle to be studied in a standard VAR model. Debt monetisation is hardly expansionary, as it raises public demand that crowds out almost as much demand from the private sector. However, it generates...