Costas Azariadis, Leo Kaas, Yi Wen, 04 April 2015

A large literature in macroeconomics shows how credit market shocks can propagate through deterioration in the value of collateral. This column decomposes debt into secured and unsecured components and investigates their effects separately. While secured debt is acyclical, unsecured debt is confirmed to predict GDP movements in accordance with the standard financial accelerator mechanism.

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