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50 Deleveraging, What Deleveraging Figure 4.8 850 800 750 700 650 Household assets, liabilities and housing prices US Households: Assets/personal income House prices, real % y/y (rhs) 15 10 5 0 -5 -10 850 800 750 700 650 EMU Households: Assets/personal income House prices, real % y/y (rhs) 15 10 5 0 -5 -10 600 01 02 03 04 05 06 07 08 09 10 11 12 13 -15 600 01 02 03 04 05 06 07 08 09 10 11 12 13 -15 140 Households liabilities (% of disposable income) 130 US 120 Eurozone 110 100 90 80 01 02 03 04 05 06 07 08 09 10 11 12 13 Source: Authors’ calculations based on ECB, Eurostat and Federal Reserve data. Figure 4.9 10 8 6 4 2 0 -2 -4 -6 -8 -10 -12 Eurozone financial flows EMU: Net lending, borrowing (% of GDP) 00 01 02 03 04 05 06 07 08 09 10 11 12 Non-Financial Corporations Financial Corporations Government Households Rest of the World 10 8 6 4 2 0 -2 -4 -6 -8 -10 -12 US: Net lending, borrowing (% of GDP) 01 02 03 04 05 06 07 08 09 10 11 12 13 Non-Financial Corporations Financial Corporations Consolidated Government Households Source: Authors’ calculations based on ECB, Eurostat and Federal Reserve data. Rest of the World
Case studies 51 The US economy started a recovery by the third quarter of 2009 (according to the NBER), the fiscal deficit started shrinking by 2010 and US household assets started rebounding by the second half of 2011, while liabilities kept falling until 2013. In the Eurozone, the recovery started at the same time (according to CEPR), but household assets remained stable while liabilities kept increasing, private saving decreasing and public saving increasing (all relative to GDP). In the third quarter of 2011, the Eurozone entered a second recession. These facts suggest that, although Eurozone households entered the crisis in a more solid balance sheet position, their net worth deteriorated as a consequence of the protracted weakness of the real economy and conservative fiscal policy. If another global recession were to hit in the next few years, it will find Eurozone households in a more vulnerable situation than in 2008. Non-financial corporations. In Chapter 2, we showed that non-financial corporations in the Eurozone built up liabilities before the crisis and, since then, have adjusted very little. From Figure 4.9, however, we can detect an adjustment in their savings behaviour. Indeed, non-financial corporations moved from a precrisis position of persistent negative savings to one of positive or zero savings. This adjustment is likely to reflect a situation of prolonged uncertainty that led to a decline in the investment rate (from 22.7% in 2007 to 19.2% in 2013). This contrasts with the US, where the savings behaviour of the corporate sector has been less persistent. The financial sector and the role of the ECB. Figure 4.10 shows the asset-to-GDP ratios of financial corporations by category, where banks are labelled as ‘Other MFI’. 20 Notice that the decline in the banks’ asset-to-GDP ratio that started in 2012 was partly offset by the increase for other financial intermediaries (OFI). 21 The total size of the balance sheet of Eurozone financial intermediaries is still not much different from before the crisis. 20 MFIs are monetary financial intermediaries and include the European Central Bank, national central banks, credit institutions and money market funds. 21 OFI are intermediaries other than banks, pension funds, insurance or money market funds. They include corporations engaged in financial leasing, financial vehicles which are holders of securitised assets, financial holding corporations, dealers in securities and derivatives (when dealing for their own account), venture capital corporations and development capital companies.
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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
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List of Conference Participants Edm
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List of Conference Participants xi
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List of Conference Participants xii
Page 17: Foreword Since 1999 the Geneva Repo
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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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