{
  "title": "Chart of the Week: When High Yield Goes Boom",
  "publication": "IMF Blog, June 26, 2018",
  "sourceUrl": "https://www.imf.org/en/blogs/articles/2018/06/26/blog-when-high-yield-goes-boom",
  "canonical": "https://www.imf.org/en/blogs/articles/2018/06/26/blog-when-high-yield-goes-boom",
  "overlayPath": "/en/blogs/articles/2018/06/26/blog-when-high-yield-goes-boom/index.md",
  "summary": "Author: Divya Kirti",
  "sections": [
    {
      "heading": "Overview",
      "content": "- Author: Divya Kirti  \n- Date: June 26, 2018  \n- Theme: Credit booms can be \"good\" or \"bad\"; booms fueled by excessive investor optimism that allocate credit to riskier firms can lead to slower growth or recessions. The piece links rising shares of high-yield (junk) debt during credit booms to weaker subsequent GDP growth."
    },
    {
      "heading": "Methods and data",
      "content": "- Sample: debt issued by governments and non-financial companies in 25 advanced economies.\n- Boom definition: a period of faster-than-normal growth in credit relative to GDP.\n- Risk metric: the share of credit growth that consists of high-yield debt (junk bonds)."
    },
    {
      "heading": "Key findings",
      "content": "- Credit booms marked by a rising share of junk bonds were followed by lower economic growth over the following three to four years.\n- Quantitative result: When the high yield share of debt rises by one standard deviation, GDP growth over the next three years is lower by 2 percentage points.\n- Interpretation: Rapid credit growth concentrated in riskier borrowers increases downside risks to growth."
    },
    {
      "heading": "Policy implications and recommendations",
      "content": "- Policymakers should monitor not just the pace of credit growth but also the riskiness of credit allocation—specifically the share of high-yield debt.\n- Potential measures to address problematic booms include:\n  - higher capital requirements;\n  - measures to restrain credit growth;\n  - tightening lending standards more broadly.\n- Note: The blog emphasizes that more research is needed on this topic.\n\nSource: IMF blog — \"Chart of the Week: When High Yield Goes Boom\" (Divya Kirti, June 26, 2018).\n\n---\n\n\n References\n\n- Português\n- https://www.imf.org/wp-content/uploads/2018/06/BLOG-1024x600-CotW-booms-and-bust-people-celebrating-Nick-White-Newscom-imsphotos054588.jpg\n- https://www.imf.org/wp-content/uploads/2018/06/eng-june-19-boomandbust-1.png\n- blog\n- Global Financial Stability Report\n- Another method\n- A Bumpy Road Ahead for the Global Financial System\n\nSource: https://www.imf.org/en/blogs/articles/2018/06/26/blog-when-high-yield-goes-boom"
    }
  ],
  "bullets": [
    "[Markdown version](/en/blogs/articles/2018/06/26/blog-when-high-yield-goes-boom/index.md)",
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    "Authors: Divya Kirti",
    "Published: June 26, 2018",
    "Author: Divya Kirti",
    "Date: June 26, 2018",
    "Theme: Credit booms can be \"good\" or \"bad\"; booms fueled by excessive investor optimism that allocate credit to riskier firms can lead to slower growth or recessions. The piece links rising shares of high-yield (junk) debt during credit booms to weaker subsequent GDP growth.",
    "Sample: debt issued by governments and non-financial companies in 25 advanced economies.",
    "Boom definition: a period of faster-than-normal growth in credit relative to GDP.",
    "Risk metric: the share of credit growth that consists of high-yield debt (junk bonds).",
    "Credit booms marked by a rising share of junk bonds were followed by lower economic growth over the following three to four years.",
    "Quantitative result: When the high yield share of debt rises by one standard deviation, GDP growth over the next three years is lower by 2 percentage points.",
    "Interpretation: Rapid credit growth concentrated in riskier borrowers increases downside risks to growth.",
    "Policymakers should monitor not just the pace of credit growth but also the riskiness of credit allocation—specifically the share of high-yield debt.",
    "Potential measures to address problematic booms include:",
    "Note: The blog emphasizes that more research is needed on this topic.",
    "[Português](https://www.imf.org/pt/News/Articles/2018/06/26/blog-when-high-yield-goes-boom)",
    "[https://www.imf.org/wp-content/uploads/2018/06/BLOG-1024x600-CotW-booms-and-bust-people-celebrating-Nick-White-Newscom-imsphotos054588.jpg](https://www.imf.org/wp-content/uploads/2018/06/BLOG-1024x600-CotW-booms-and-bust-people-celebrating-Nick-White-Newscom-imsphotos054588.jpg)",
    "[https://www.imf.org/wp-content/uploads/2018/06/eng-june-19-boomandbust-1.png](https://www.imf.org/wp-content/uploads/2018/06/eng-june-19-boomandbust-1.png)",
    "[blog](https://blogs.imf.org/2018/04/10/risky-business-reading-credit-flows-for-crisis-signals/)",
    "[Global Financial Stability Report](http://www.imf.org/en/Publications/GFSR/Issues/2018/04/02/Global-Financial-Stability-Report-April-2018)",
    "[Another method](http://www.imf.org/en/Publications/WP/Issues/2018/01/26/Lending-Standards-and-Output-Growth-45595)",
    "[A Bumpy Road Ahead for the Global Financial System](https://blogs.imf.org/2018/04/18/a-bumpy-road-ahead-for-the-global-financial-system/)"
  ],
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