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Working Paper
Zombies at Large? Corporate Debt Overhang and the Macroeconomy
Jordà, Òscar; Kornejew, Martin; Schularick, Moritz; Taylor, Alan M. (2020-12-08)
With business leverage at record levels, the effects of corporate debt overhang on growth and investment have become a prominent concern. In this paper, we study the effects of corporate debt overhang based on long-run cross-country data covering the near universe modern business cycles. We show that business credit booms typically do not leave a lasting imprint on the macroeconomy. Quantile local projections indicate that business credit booms do not affect the economy’s tail risks either. Yet in line with theory, we find that the economic costs of corporate debt booms rise when ...
Working Paper Series , Paper 2020-36

Working Paper
Sovereigns versus Banks: Credit, Crises, and Consequences
Taylor, Alan M.; Jordà, Òscar; Schularick, Moritz (2013)
Two separate narratives have emerged in the wake of the Global Financial Crisis. One speaks of private financial excess and the key role of the banking system in leveraging and deleveraging the economy. The other emphasizes the public sector balance sheet over the private and worries about the risks of lax fiscal policies. However, the two may interact in important and understudied ways. This paper studies the co-evolution of public and private sector debt in advanced countries since 1870. We find that in advanced economies financial stability risks have come from private sector credit booms ...
Working Paper Series , Paper 2013-37

Working Paper
The Time for Austerity: Estimating the Average Treatment Effect of Fiscal Policy
Taylor, Alan M.; Jordà, Òscar (2013-09)
Elevated government debt levels in advanced economies have risen rapidly as sovereigns absorbed private sector losses and cyclical deficits blew up in the Global Financial Crisis and subsequent slump. A rush to fiscal austerity followed but its justifications and impacts have been heavily debated. Research on the effects of austerity on macroeconomic aggregates remains unsettled, mired by the difficulty of identifying multipliers from observational data. This paper reconciles seemingly disparate estimates of multipliers within a unified framework. We do this by first evaluating the validity ...
Working Paper Series , Paper 2013-25

Journal Article
When Is Shelter Services Inflation Coming Down?
Jordà, Òscar; Yalcin, Aren S. (2024-09-03)
Shelter costs are one of the largest expenses for most households and an important component of overall inflation. It is therefore important to understand why shelter costs have remained stubbornly high. A key explanation is that, especially since the pandemic, demand for housing has been growing faster than new units have come into the market. Using the gap between the demand for and supply of housing along with other leading indicators of shelter prices can help assess whether shelter inflation will continue on a path toward historically normal levels.
FRBSF Economic Letter , Volume 2024 , Issue 23

Working Paper
Decomposing the Fiscal Multiplier
Taylor, Alan M.; Jordà, Òscar; Cloyne, James (2020-03-27)
Unusual circumstances often coincide with unusual fiscal policy actions. Much attention has been paid to estimates of how fiscal policy affects the macroeconomy, but these are typically average treatment effects. In practice, the fiscal “multiplier” at any point in time depends on the monetary policy response. Using the IMF fiscal consolidations dataset for identification and a new decomposition-based approach, we show how to evaluate these monetary-fiscal effects. In the data, the fiscal multiplier varies considerably with monetary policy: it can be zero, or as large as 2 depending on ...
Working Paper Series , Paper 2020-12

Journal Article
Monetary policy when the spyglass is smudged
Elias, Early; Jordà, Òscar; Irvin, Helen (2014)
An accurate measure of economic slack is key to properly calibrating monetary policy. Two traditional gauges of slack have become harder to interpret since the Great Recession: the gap between output and its potential level, and the deviation of the unemployment rate from its natural rate. As a consequence, conventional policy rules based on these measures of slack generate wide-ranging policy rate recommendations. This variability highlights one of the challenges policymakers currently face.
FRBSF Economic Letter

Working Paper
Disasters Everywhere: The Costs of Business Cycles Reconsidered
Schularick, Moritz; Taylor, Alan M.; Jordà, Òscar (2020-03-31)
Business cycles are costlier and stabilization policies more beneficial than widely thought. This paper shows that all business cycles are asymmetric and resemble mini “disasters”. By this we mean that growth is pervasively fat-tailed and non-Gaussian. Using long-run historical data, we show empirically that this is true for all advanced economies since 1870. Focusing on the peacetime sample, we develop a tractable local projection framework to estimate consumption growth paths for normal and financial-crisis recessions. Using random coefficient local projections we get an easy and ...
Working Paper Series , Paper 2020-11

Report
Zombies at Large? Corporate Debt Overhang and the Macroeconomy
Jordà, Òscar; Kornejew, Martin; Schularick, Moritz; Taylor, Alan M. (2020-12-01)
With business leverage at record levels, the effects of corporate debt overhang on growth and investment have become a prominent concern. In this paper, we study the effects of corporate debt overhang based on long-run cross-country data covering the near-universe of modern business cycles. We show that business credit booms typically do not leave a lasting imprint on the macroeconomy. Quantile local projections indicate that business credit booms do not affect the economy’s tail risks either. Yet in line with theory, we find that the economic costs of corporate debt booms rise when ...
Staff Reports , Paper 951

Journal Article
Future recession risks: an update
Elias, Early; Jordà, Òscar; Berge, Travis J. (2011)
In 2010, statistical experiments based on components of the Conference Board?s Leading Economic Index showed a significant possibility of a U.S. recession over a 24-month period. Since then, the European sovereign debt crisis has aggravated international threats to the U.S. economy. Moreover, the Japanese earthquake and tsunami demonstrated that the U.S. economy is vulnerable to outside disruptions. Updated forecasts suggest that the probability of a U.S. recession has remained elevated and may have increased over the past year, in part because of foreign financial and economic crises.
FRBSF Economic Letter

Working Paper
Global Financial Cycles and Risk Premiums
Jordà, Òscar; Ward, Felix; Taylor, Alan M.; Schularick, Moritz (2018-06-11)
This paper studies the synchronization of financial cycles across 17 advanced economies over the past 150 years. The comovement in credit, house prices, and equity prices has reached historical highs in the past three decades. The sharp increase in the comovement of global equity markets is particularly notable. We demonstrate that fluctuations in risk premiums, and not risk-free rates and dividends, account for a large part of the observed equity price synchronization after 1990. We also show that U.S. monetary policy has come to play an important role as a source of fluctuations in risk ...
Working Paper Series , Paper 2018-5

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