## Sectoral Debt and Global Dollar Cycles in Developing Economies

_IMF Working Papers, February 16, 2024_

## Source details

**Canonical URL:** [Sectoral Debt and Global Dollar Cycles in Developing Economies](https://www.imf.org/en/publications/wp/issues/2024/02/16/sectoral-debt-and-global-dollar-cycles-in-developing-economies-544447)

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## Bibliographic details
- Authors: Bada Han, Rashad Ahmed, Joshua Aizenman, Yothin Jinjarak
- Published: February 16, 2024
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9798400267208.001

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### Key findings
- Sample and period:
  - Study covers a sample of 52 Emerging Market Economies (EMEs) and Frontier Market Economies (FMEs) from 2005 to 2021.
- Household debt and GDP growth:
  - Higher household debt levels and growth are associated with significantly slower GDP growth in more developed EMEs.
  - The association between household debt and GDP growth is not found in less developed EMEs and FMEs.
- Interaction with US dollar cycles:
  - Among developed EMEs, higher expected household debt growth magnifies the impact of US dollar fluctuations on economic activity.
  - The amplified effects on consumption are significant but less persistent.
  - The amplified effects on investment are significant and more persistent.

### Empirical focus and themes
- Sectoral debt dynamics examined include household debt levels and debt growth across countries classified as EMEs and FMEs.
- The analysis links sectoral (household) debt metrics with business-cycle outcomes (GDP growth, consumption, investment).
- Global factor evaluated: US dollar cycles and their interaction with sectoral debt expectations.

### Implications (analytical)
- Household debt dynamics play an important role in shaping macroeconomic outcomes in relatively developed EMEs.
- The persistence differential—less persistent consumption effects versus more persistent investment effects—highlights distinct transmission channels from household debt and external (dollar) shocks to aggregate demand components.

*By Bada Han, Rashad Ahmed, Joshua Aizenman, and Yothin Jinjarak; February 16, 2024 (IMF Working Paper).*

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_Source: https://www.imf.org/en/publications/wp/issues/2024/02/16/sectoral-debt-and-global-dollar-cycles-in-developing-economies-544447_