Work

Macrofinancial History and the New Business Cycle Facts

Year: 2017

Type: article

Abstract: 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.

Source: NBER Macroeconomics Annual

DOI: 10.1086/690241

Authors: Òscar Jordà, Moritz Schularick, Alan M. Taylor

Institutions: Federal Reserve Bank of San Francisco, University of California, Davis, Center for Economic and Policy Research, University of Bonn, Centre for Economic Policy Research

Language: English

Topic: Economic Theory and Policy

Subfield: General Economics, Econometrics and Finance

Field: Economics, Econometrics and Finance

Domain: Social Sciences

Open Access status: green

Funders: Institute for New Economic Thinking, Volkswagen Foundation

OpenAlex ID: W3123381758