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44 Deleveraging, What Deleveraging Table 4.2 Data description Variable Description Source Transformation IR 10y 10-Year Treasury Constant Maturity Rate Federal Reserve Board - IR 3m Consumption Employment S&L Gov Saving Real GDP Fed Gov Saving NR Priv Inv R Priv Inv HH Debt/PI House Prices HH Savings HH Credit Liab NFC Credit Liab Fin Bus Credit Liab CPI SP 500 HH Assets/PI 3-Month Treasury Bill: Secondary Market Rate Personal Consumption Expenditures All Employees: Total nonfarm Gross government saving: State and local Gross Domestic Product Gross Government Saving Private Nonresidential Fixed Investment Private Residential Fixed Investment Household Debt Service Payments as a Percent of Disposable Personal Income All-Transactions House Price Index for the United States Gross private saving: Households and institutions Households and Nonprofit Organizations; Credit Market Instruments; Liability, Level Nonfinancial Corporate Business; Credit Market Instruments; Liability Financial Business; Credit Market Instruments; Liability, Level Consumer Price Index for All Urban Consumers: All Items S&P 500 Stock Price Index Households and nonprofit organizations; total assets / Disposable Personal Income Federal Reserve Board - Bureau of Economic Analysis Bureau of Labor Statistics Bureau of Economic Analysis Bureau of Economic Analysis Bureau of Economic Analysis Bureau of Economic Analysis Bureau of Economic Analysis Log Log - Log - Log Log Federal Reserve Board - Federal Housing Finance Agency Bureau of Economic Analysis Federal Reserve Board Federal Reserve Board Federal Reserve Board Bureau of Labor Statistics S&P Dow Jones Indices LLC Federal Reserve Board; U.S. Department of Commerce: Bureau of Economic Analysis Log Log Log Log Log Log Log - Given the parameter estimates, this counterfactual is computed as conditional forecasts of the variables of interest included in the model, where the conditioning information is given by: (i) the 1983:Q1-2007:Q4 history of all variables in the model; and (ii) the observed outcomes of the level of real GDP and CPI until the end of the sample in 2013:Q3. Box 4.1 reports technical details. Figure 4.6 reports the 2.5% and 97.5% percentiles of the counterfactual forecast distributions, as a measure of the width of the distributions. Any developments outside those percentiles are identified as being ‘unlikely’ or ‘exceptional’, given
Case studies 45 the historical regularities our model identifies in the pre-crisis data and the business cycle paths that we have defined. Figure 4.6 Conditional forecast – recession 2007-08 Conditional Forecast −− Recession 2007−2008 950 Consumption 1195 Employment 400 S&L Gov Saving 970 Real GDP 500 Fed Gov Saving 940 930 920 1190 1185 1180 200 0 965 960 0 −500 −1000 910 2006 2009 2012 1175 2006 2009 2012 −200 2006 2009 2012 955 2006 2009 2012 −1500 2006 2009 2012 780 NR Priv Inv 750 R Priv Inv 14 HH Debt/PI 640 House Prices 750 HH Savings 760 740 720 700 650 600 12 10 620 600 580 700 650 700 2006 2009 2012 550 2006 2009 2012 8 2006 2009 2012 560 2006 2009 2012 600 2006 2009 2012 1000 HH Credit Liab 940 NFC Credit Liab 1020 Fin Bus Credit Liab 550 CPI 900 HH Assets/PI 980 960 920 900 880 1000 980 960 540 530 800 700 940 2006 2009 2012 860 2006 2009 2012 940 2006 2009 2012 520 2006 2009 2012 600 2006 2009 2012 10 IR 3m 10 IR 10y 850 SP500 5 0 −5 5 0 800 750 700 True Cond. Forecast −10 2006 2009 2012 −5 2006 2009 2012 650 2006 2009 2012 Some of the variables considered show no significant difference between the counterfactual and the realised paths (both paths are within the bands of the counterfactual distribution). These are all the macroeconomic variables, stock prices (with the exception of 2008) and the liabilities of non-financial corporations. Notwithstanding their volatility since the crisis, their dynamics are not ‘exceptional’ in the sense that they correspond to their historical association with nominal GDP. This is not the case for variables related to housing (nonresidential investment and housing prices), variables related to household net worth (the ratio of household assets to personal income, household liabilities, the ratio of household debt service payments to disposable income), variables related to the fiscal stance (government savings during the recession years), the liabilities of financial businesses, and nominal interest rates until late 2011. According to our metric of what constitutes an ‘exceptional adjustment’, there is a clear difference between household and financial institutions on one hand, and non-financial corporations on the other. While the former sectors have engaged in a sharp and ‘exceptional’ deleveraging process, the latter has not. Household deleveraging has taken place in association with an exceptional
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Geneva Reports on the World Economy
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International Center for Monetary a
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International Center for Monetary a
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Acknowledgements We thank Susan Lun
Page 11 and 12: List of Conference Participants Edm
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Page 17: Foreword Since 1999 the Geneva Repo
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Discussions 95 about potential GDP
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Discussions 97 when there is no com
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Discussions 99 In response to Laure
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Data Appendix Debt typically expres
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References Adrian, T., E. Moench an
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References 105 Jorda, O., M. Schula
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It is widely accepted that high lev
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