We find that deep contractions have highly persistent scarring effects, depressing the level of GDP at least a decade hence. Drawing on a panel of 24 advanced and emerging economies from 1970 to the present, we show that these effects are nonlinear and asymmetric: there is no such persistence...

This paper reviews the debt service ratio (DSR) as a theoretically well-grounded indicator of systemic risk. The DSR has the desirable feature that it fluctuates around a stable level which makes its early warning signals easy to understand and communicate. In contrast, current early warning...

Persistent shifts in equilibria are likely to arise in oligopolistic markets and may be detrimental to the measurement of conduct, related markups and intensity of competition. We develop a cointegrated VAR (vector autoregression) based approach to detect long-run changes in conduct when data...

What level of indebtedness jeopardizes economic stability? We show that the ratio of financial obligations (interest payments and amortizations) to income is crucial for capturing debt sustainability. Estimating a regime-switching model on aggregate US data, we find that credit losses become...

Early warning indicators (EWIs) of banking crises should ideally be evaluated on the basis of their performance relative to the macroprudential policy maker's decision problem. We translate several practical aspects of this problem - such as difficulties in assessing the costs and benefits of...

Eine übermässige Verschuldung des privaten Sektors kann die Stabilität der Wirtschaft untergraben. In diesem Feature wird die Schuldendienstquote als Messgrösse für den eingeschränkten finanziellen Spielraum vorgeschlagen, der sich aus der Verschuldung des privaten Sektors ergibt. Ferner...