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Persistent economic slowdown and emergence of debt-ridden borrowers

Kobayashi, Keiichiro, (2017), “Persistent economic slowdown and emergence of debt-ridden borrowers”, VoxEU, 2 May

There is concern about the persistent slowdown of economic growth in the aftermath of financial crises. This column presents a framework which shows that excessive debt accumulated by firms and households during a crisis can cause persistent stagnation. Relief from excessive debt has a direct impact on economic growth, whereas unconventional monetary and fiscal policies cannot directly solve the fundamental debt problem.

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