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Macrofinancial History and the New Business Cycle Facts

Listed author(s):
  • Òscar Jordà
  • Moritz Schularick
  • Alan M. Taylor

In advanced economies, a century-long near-stable ratio of credit to GDP gave way to rapid financialization and surging leverage in the last forty years. This “financial hockey stick” coincides with shifts in foundational macroeconomic relationships beyond the widely-noted return of macroeconomic fragility and crisis risk. Leverage is correlated with central business cycle moments, which we can document thanks to a decade-long international and historical data collection effort. More financialized economies exhibit somewhat less real volatility, but also lower growth, more tail risk, as well as tighter real-real and real-financial correlations. International real and financial cycles also cohere more strongly. The new stylized facts that we discover should prove fertile ground for the development of a new generation of macroeconomic models with a prominent role for financial factors.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 22743.

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Date of creation: Oct 2016
Publication status: published as Macrofinancial History and the New Business Cycle Facts , Òscar Jordà, Moritz Schularick, Alan M. Taylor. in NBER Macroeconomics Annual 2016, Volume 31 , Eichenbaum and Parker. 2017
Handle: RePEc:nbr:nberwo:22743
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