Fed paper questions value of debt as crisis indicator
Asset prices and current account balance more important, author finds
Research published by the Federal Reserve has questioned the value of debt growth as an early indicator of financial distress, arguing other metrics produce more reliable results.
Fed economist Michael Kiley’s working paper challenges seminal findings in other parts of the literature that have stressed the importance of debt in predicting financial crises.
“Our analysis suggests house prices, equity prices and current account deficits have substantial leading information in econometric models
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