Public borrowing displays at least some countercyclical elements as it tends to grow faster in recessions than in expansions. These different cyclical trajectories tend to be most pronounced in the runup to and the aftermath of ﬁnancial crises (Jordà, Schularick and Taylor 2016b).
Based on data for the group of advanced economies discussed above, Figure 2 conﬁrms that private and public debt are likely to move in opposite directions around these episodes. Bank lending typically strongly increases in the years before a ﬁnancial crisis. By contrast, governments tend to be able to reduce their debt burden relative to GDP.