A Note on Leverage and the Macroeconomy
In this paper we investigate the relationship between leverage and the level of economic activity in the United States, using quarterly data over the 1951 to 2012 period. We address the question for Â…five different measures of leverage - Â—household leverage, nonÂ…financial fiÂ…rm leverage, commercial bank leverage, broker-dealer leverage, and shadow bank leverage -Â— making a distinction between traditional banks and shadow banks, the latter being a consequence of fiÂ…nancial innovation and deregulation in the Â…financial services industry over the past 30 years. We investigate whether the relationship between leverage and the level of economic activity is nonlinear and asymmetric using slope-based tests as well as tests of the null hypothesis of symmetric impulse responses, recently introduced by Kilian and Vigfusson (2011). Our results inform policymakers about the important distinction between traditional banks and market-based fiÂ…nancial intermediaries that have been at the center of the global fiÂ…nancial crisis of 2007-2009. They also inform about the macroeconomic effects of the deleveraging process that began in 2008 as well as about the need for countercyclical macroprudential policies to reduce the procyclicality of the fiÂ…nancial system.
|Date of creation:||01 Apr 2014|
|Date of revision:||01 Apr 2014|
|Contact details of provider:|| Postal: 2500 University Drive N.W., Calgary, Alberta, T2N 1N4|
Phone: (403) 220-5857
Fax: (403) 282-5262
Web page: http://econ.ucalgary.ca/
More information through EDIRC
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.:
- Michael T. Belongia & Peter N. Ireland, 2010.
"The Barnett Critique After Three Decades: A New Keynesian Analysis,"
Boston College Working Papers in Economics
736, Boston College Department of Economics.
- Belongia, Michael T. & Ireland, Peter N., 2014. "The Barnett critique after three decades: A New Keynesian analysis," Journal of Econometrics, Elsevier, vol. 183(1), pages 5-21.
- Michael T. Belongia & Peter N. Ireland, 2012. "The Barnett Critique After Three Decades: A New Keynesian Analysis," NBER Working Papers 17885, National Bureau of Economic Research, Inc.
- Hamilton, James D., 2003.
"What is an oil shock?,"
Journal of Econometrics,
Elsevier, vol. 113(2), pages 363-398, April.
- Apostolos Serletis & Periklis Gogas, 2013.
"Divisia Monetary Aggregates, the Great Ratios, and Classical Money Demand Functions,"
2013-02, Department of Economics, University of Calgary.
- Apostolos Serletis & Periklis Gogas, 2014. "Divisia Monetary Aggregates, the Great Ratios, and Classical Money Demand Functions," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 46(1), pages 229-241, 02.
- Apostolos Serletis & Khandokar Istiak & Periklis Gogas, 2013. "Interest Rates, Leverage, and Money," Open Economies Review, Springer, vol. 24(1), pages 51-78, February.
- Apostolos Serletis, 2014.
"Introduction to Macroeconomic Dynamics Special Issue on Complexity in Economic Systems,"
2014-40, Department of Economics, University of Calgary, revised 25 Feb 2014.
- Serletis, Apostolos, 2016. "Introduction To Macroeconomic Dynamics Special Issue On Complexity In Economic Systems," Macroeconomic Dynamics, Cambridge University Press, vol. 20(02), pages 461-465, March.
- Hamilton, James D., 1996. "This is what happened to the oil price-macroeconomy relationship," Journal of Monetary Economics, Elsevier, vol. 38(2), pages 215-220, October.
When requesting a correction, please mention this item's handle: RePEc:clg:wpaper:2014-45. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (May Ives)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.