Macrofinancial History and the New Business Cycle Facts

Alan Taylor, Oscar Jorda and Moritz Schularick

No 11587, CEPR Discussion Papers from Centre for Economic Policy Research

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 be- yond 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 finan- cial 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.

Keywords: Financial hockey stick; Leverage; Credit; Moments; Macroeconomics (search for similar items in EconPapers)
JEL-codes: E01 E13 E30 E32 E44 E51 F42 F44 G12 (search for similar items in EconPapers)
Date: 2016-10
New Economics Papers: this item is included in nep-his, nep-mac and nep-opm
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (101)

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Related works:
Journal Article: Macrofinancial History and the New Business Cycle Facts (2017)
Chapter: Macrofinancial History and the New Business Cycle Facts (2016)
Working Paper: Macrofinancial History and the New Business Cycle Facts (2016)
Working Paper: Macrofinancial History and the New Business Cycle Facts (2016)
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