IMF Working Papers

Sectoral Debt and Global Dollar Cycles in Developing Economies

By Bada Han, Rashad Ahmed, Joshua Aizenman, Yothin Jinjarak

February 16, 2024

Download PDF Order a Print Copy
Order a Print Copy

Preview Citation

Format: Chicago

Bada Han, Rashad Ahmed, Joshua Aizenman, and Yothin Jinjarak. Sectoral Debt and Global Dollar Cycles in Developing Economies, (USA: International Monetary Fund, 2024) accessed November 23, 2024

Disclaimer: IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.

Summary

We explore the role of sectoral debt dynamics in shaping business cycles in a sample of 52 Emerging Market Economies (EMEs) and Frontier Market Economies (FMEs) from 2005 to 2021. Higher household debt levels and growth are associated with significantly slower GDP growth in more developed EMEs but not in less developed EMEs and FMEs. We also examine the relationship between US dollar cycles, sectoral debt levels and growth, and economic activity. Among developed EMEs, higher expected household debt growth magnifies the impact of US dollar fluctuations on economic activity, with significant but less persistent effects on consumption and more persistent effects on investment. Our empirical findings highlight the important role of household debt dynamics in relatively developed EMEs.

Subject: Business cycles, Consumption, Economic growth, External debt, Income, National accounts, Public debt

Keywords: Appreciation shock, Business cycles, Consumption, Debt cycle, Debt growth, Debt level, Dollar Cycle, Emerging Markets, Global, Household Debt, Household debt growth, Income, Sectoral Debt

Publication Details

  • Pages:

    43

  • Volume:

    ---

  • DOI:

    ---

  • Issue:

    ---

  • Series:

    Working Paper No. 2024/030

  • Stock No:

    WPIEA2024030

  • ISBN:

    9798400267208

  • ISSN:

    1018-5941

You May Also Be Interested In...

Sierra Leone: 2024 Article IV Consultation and Request for a 38-Month Arrangement Under the Extended Credit Facility-Press Release; Staff Report; Staff Statement; and Statement by the Executive Director for Sierra Leone

November 22, 2024

The Role of Corporate Cash Holdings in the Transmission of Monetary Policy Tightening

November 22, 2024

The Fund's Income Position for FY 2024--Actual Outcome

November 21, 2024

Guidance Note On The Financing Assurances And Sovereign Arrears Policies And The Fund's Role In Debt Restructurings

November 18, 2024