BIS research posits test for unsustainable credit growth


Researchers at the Bank for International Settlements (BIS) have put forward a method for assessing when credit growth is unsustainable, offering a method that could predict financial crises years in advance.

Published today (May 8), the working paper Leverage dynamics and the real burden of debt by Mikael Juselius and Mathias Drehmann begins with the problem of separating long-term credit growth driven by financial deepening from more dangerous movements.

Juselius and Drehmann use a vector auto

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