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The Leverage Cycle

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Author Info
John Geanakoplos () (Cowles Foundation, Yale University)
Abstract

Equilibrium determines leverage, not just interest rates. Variations in leverage cause fluctuations in asset prices. This leverage cycle can be damaging to the economy, and should be regulated.

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File URL: http://cowles.econ.yale.edu/P/cd/d17a/d1715.pdf
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Publisher Info
Paper provided by Cowles Foundation, Yale University in its series Cowles Foundation Discussion Papers with number 1715.

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Length: 54 pages
Date of creation: Jul 2009
Date of revision:
Handle: RePEc:cwl:cwldpp:1715

Contact details of provider:
Postal: Yale University, Box 208281, New Haven, CT 06520-8281 USA
Phone: (203) 432-3702
Fax: (203) 432-6167
Web page: http://cowles.econ.yale.edu/
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Postal: Cowles Foundation, Yale University, Box 208281, New Haven, CT 06520-8281 USA

For technical questions regarding this item, or to correct its listing, contact: (Glena Ames).

Related research
Keywords: Leverage; Collateral; Cycle; Crisis; Regulation;

Find related papers by JEL classification:
E3 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles
E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
G01 - Financial Economics - - General - - - Financial Crises
G12 - Financial Economics - - General Financial Markets - - - Asset Pricing

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Ana Fostel & John Geanakoplos, 2004. "Collateral Restrictions and Liquidity Under-Supply: A Simple Model," Cowles Foundation Discussion Papers 1468R, Cowles Foundation, Yale University, revised Aug 2006. [Downloadable!]
  2. Bernanke, Ben S. & Gertler, Mark & Gilchrist, Simon, 1999. "The financial accelerator in a quantitative business cycle framework," Handbook of Macroeconomics, in: J. B. Taylor & M. Woodford (ed.), Handbook of Macroeconomics, edition 1, volume 1, chapter 21, pages 1341-1393 Elsevier. [Downloadable!] (restricted)
    Other versions:
  3. Ana Fostel & John Geanakoplos, 2008. "Collateral restrictions and liquidity under-supply: a simple model," Economic Theory, Springer, vol. 35(3), pages 441-467, June. [Downloadable!] (restricted)
  4. Kiyotaki, Nobuhiro & Moore, John, 1997. "Credit Cycles," Journal of Political Economy, University of Chicago Press, vol. 105(2), pages 211-48, April.
    Other versions:
  5. Markus K. Brunnermeier & Lasse Heje Pedersen, 2009. "Market Liquidity and Funding Liquidity," Review of Financial Studies, Oxford University Press for Society for Financial Studies, vol. 22(6), pages 2201-2238, June. [Downloadable!] (restricted)
    Other versions:
  6. Caballero, Ricardo J. & Krishnamurthy, Arvind, 2001. "International and domestic collateral constraints in a model of emerging market crises," Journal of Monetary Economics, Elsevier, vol. 48(3), pages 513-548, December. [Downloadable!] (restricted)
    Other versions:
  7. Ana Fostel & John Geanakoplos, 2008. "Leverage Cycles and the Anxious Economy," American Economic Review, American Economic Association, vol. 98(4), pages 1211-44, September. [Downloadable!]
  8. Tobias Adrian & Hyun Song Shin, 2008. "Liquidity and leverage," Staff Reports 328, Federal Reserve Bank of New York. [Downloadable!]
  9. Guido Lorenzoni, 2008. "Inefficient Credit Booms," Review of Economic Studies, Blackwell Publishing, vol. 75(3), pages 809-833, 07. [Downloadable!] (restricted)
    Other versions:
Full references

Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Dubecq, S. & Mojon, B. & Ragot, X., 2009. "Fuzzy Capital Requirements, Risk-Shifting and the Risk Taking Channel of Monetary Policy," Documents de Travail 254, Banque de France. [Downloadable!]
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This page was last updated on 2009-12-4.

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