Credit expansions strengthen recessionary trends: SF Fed paper

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The length and severity of recessions are directly correlated with the level of credit expansion during boom periods, according to a San Francisco Federal Reserve paper published on Friday.

Oscar Jorda, Moritz Schularick and Alan Taylor, the paper's authors, use data on nearly 200 recession episodes in 14 advanced countries between 1870 and 2008 to study the role of leverage in the business cycle. They use local projection methods to study how leverage affects the behaviour of key macroeconomic

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