## Chart of the Week: When High Yield Goes Boom

_IMF Blog, June 26, 2018_

## Source details

**Canonical URL:** [Chart of the Week: When High Yield Goes Boom](https://www.imf.org/en/blogs/articles/2018/06/26/blog-when-high-yield-goes-boom)

## Other formats

- [Markdown version](/en/blogs/articles/2018/06/26/blog-when-high-yield-goes-boom/index.md)
- [Structured JSON version](/en/blogs/articles/2018/06/26/blog-when-high-yield-goes-boom/index.json)
- [Bundle manifest](/en/blogs/articles/2018/06/26/blog-when-high-yield-goes-boom/bundle-manifest.json)

## Bibliographic details
- Authors: Divya Kirti
- Published: June 26, 2018

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### Overview
- 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.

### Methods and data
- 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).

### Key findings
- 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.

### Policy implications and recommendations
- 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:
  - higher capital requirements;
  - measures to restrain credit growth;
  - tightening lending standards more broadly.
- Note: The blog emphasizes that more research is needed on this topic.

*Source: IMF blog — "Chart of the Week: When High Yield Goes Boom" (Divya Kirti, June 26, 2018).*

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## References

- [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/)

_Source: https://www.imf.org/en/blogs/articles/2018/06/26/blog-when-high-yield-goes-boom_