A steeper line to the left of the vertical bar implies higher credit growth prior to the peak; a more negatively sloped line to the right implies a larger reduction in credit during the downturn. The right side of the chart considers commercial mortgages and nonfinancial business credit.
Loukas and his co-author also find the second explanation difficult to reconcile with the data, as investment spending on unmeasured capital would need to be implausibly large to account for factorless income. It is the third potential explanation that turns out to be the most promising.