Related papers: Household Leverage Cycle Around the Great Recessio…
Empirical business cycle studies using cross-country data usually cannot achieve causal relationships while within-country studies mostly focus on the bust period. We provide the first causal investigation into the boom period of the…
What causes house prices to rise and fall? Economists identify household access to credit as a crucial factor. "Loan-to-Value" and "Debt-to-GDP" ratios are the standard measures for credit access. However, these measures fail to explain the…
I sketch a program for a microeconomic theory of the main component of the business cycle as a recurring disequilibrium, driven by incompleteness of the financial market and by information asymmetries between borrowers and lenders. This…
Using a large quarterly macroeconomic dataset for the period 1960-2017, we document the ability of specific financial ratios from the housing market and firms' aggregate balance sheets to predict GDP over medium-term horizons in the United…
Analysis of the 2007-8 credit crisis has concentrated on issues of relaxed lending standards, and the perception of irrational behaviour by speculative investors in real estate and other assets. Asset backed securities have been extensively…
This study investigates the impact of increased debt servicing costs on household consumption resulting from monetary policy tightening. It utilizes observational panel microdata on all mortgage holders in Israel and leverages…
We explore what causes business cycles by analyzing the Japanese industrial production data. The methods are spectral analysis and factor analysis. Using the random matrix theory, we show that two largest eigenvalues are significant. Taking…
Based on the quarterly data from 26 advanced economies (AEs) and 18 emerging market economies (EMs) over the past two decades, this paper estimates the short- and medium-term impacts of financial cycles on the duration and amplitude of…
We model a network economy with three sectors: downstream firms, upstream firms, and banks. Agents are linked by productive and credit relationships so that the behavior of one agent influences the behavior of the others through network…
This study explores the interdependent relationship between consumer credit and consumer confidence in the United States using monthly data from January 1978 to August 2024. Utilizing a Vector Error Correction Model (VECM), the analysis…
In this letter we present a stochastic dynamic model which can explain economic cycles. We show that the macroscopic description yields a complex dynamical landscape consisting of multiple stable fixed points, each corresponding to a split…
A macroeconomic model based on the economic variables (i) assets, (ii) leverage (defined as debt over asset) and (iii) trust (defined as the maximum sustainable leverage) is proposed to investigate the role of credit in the dynamics of…
Despite decades of climate policy and rapid improvements in energy efficiency, global CO2 emissions continue to rise, suggesting the presence of structural drivers that offset efficiency gains. Here we identify financial leverage as a key…
Consumption is a primary source of economic growth and key indicator of poverty. The establishment of community banks can provide credit resources, unlocking household consumption potential and playing a crucial role in economic…
Recurrent boom-and-bust cycles are a salient feature of economic and financial history. Cycles found in the data are stochastic, often highly persistent, and span substantial fractions of the sample size. We refer to such cycles as "long".…
This paper studies how a large increase in the price level is transmitted to the real economy through firm balance sheets. Using newly digitized macro- and micro-level data from the German inflation of 1919-1923, we show that inflation led…
I develop and estimate a dynamic equilibrium model of risky entrepreneurs' borrowing and savings decisions incorporating both formal and local-informal credit markets. Households have access to an exogenous formal credit market and to an…
The credit crisis roiling the world's financial markets will likely take years and entire careers to fully understand and analyze. A short empirical investigation of the current trends, however, demonstrates that the losses in certain…
Various works have already showed that common shocks and cross-country financial linkages caused the banking systems of several countries to be highly interconnected with the result that during bad times, banking crises may arise…
This paper analyzes the bank lending channel and the heterogeneous effects on the euro area, providing evidence that the channel is indeed working. The analysis of the transmission mechanism is based on structural impulse responses to an…