Sustainable financial obligations and crisis cycles

Mikael Juselius, Moshe Kim

Research output: Contribution to journalArticlepeer-review


The ability to distinguish between sustainable and excessive debt developments is crucial for securing economic stability. By studying US private sector credit loss dynamics, we show that this distinction can be made based on a measure of the incipient aggregate liquidity constraint, the financial obligations ratio. Specifically, as this variable rises, the interaction between credit losses and the business cycle increases, albeit with different intensity depending on whether the problems originate in the household or the business sector. This occurs 1–2 years before each recession in the sample. Our results have implications for macroprudential policy and countercyclical capital-buffers.

Original languageEnglish
Article number27
Issue number2
StatePublished - Jun 2017

Bibliographical note

Publisher Copyright:
© 2017 by the authors. Licensee MDPI, Basel, Switzerland.


  • Credit losses
  • Debt sustainability
  • Financial crises
  • Financial obligations
  • Non-linear cointegration
  • Smooth transition regression

ASJC Scopus subject areas

  • Economics and Econometrics


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