BIS paper links debt service lag to impact on real economy
Lag between borrowing and peak debt service helps explain negative effects of debt booms
The lag between debt accumulation and the peak of debt service costs helps explain why debt booms have a delayed impact on the real economy and the probability of crises, according to a working paper published by the Bank for International Settlements.
In Accounting for debt service: the painful legacy of credit booms, authors Mathias Drehmann, Mikael Juselius and Anton Korinek base their results on the observation that debt service costs peak after the highest point of a credit boom – around
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