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Documents on economicsJordi Gual, Oriol Aspachs, Sandra Jódar-Rosell

This paper seeks to delimit the depth and duration of the deleveraging process that is taking place in most of the developed countries and, specially, in the Spanish economy. To this end, two different approaches are used. First, we obtain the leverage ratio that can be sustained in the long term using data from 16 developed countries. Results show that the Spanish leverage ratio exceeds the level set by the long term trend, as it is the case in most countries. Second, we characterize the deleveraging processes that have occurred in the last 30 years. A typical deleveraging process lasts for 5 years, period in which the leverage ratio falls around 19 percentage points. Those episodes triggered by a real-estate plus a banking crisis are severer: they last for 7 years on average and the leverage ratio falls around 32 percentage points. These estimates are then used to assess the possible length and pace of the deleveraging process in Spain.

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