Leverage and Deepening Business Cycle Skewness

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Standard

Leverage and Deepening Business Cycle Skewness. / Santoro, Emiliano; Jensen, Henrik; Ravn, Søren Hove; Petrella, Ivan.

I: American Economic Journal: Macroeconomics, Bind 12/1, 2020, s. 245-281.

Publikation: Bidrag til tidsskriftTidsskriftartikelForskningfagfællebedømt

Harvard

Santoro, E, Jensen, H, Ravn, SH & Petrella, I 2020, 'Leverage and Deepening Business Cycle Skewness', American Economic Journal: Macroeconomics, bind 12/1, s. 245-281.

APA

Santoro, E., Jensen, H., Ravn, S. H., & Petrella, I. (2020). Leverage and Deepening Business Cycle Skewness. American Economic Journal: Macroeconomics, 12/1, 245-281.

Vancouver

Santoro E, Jensen H, Ravn SH, Petrella I. Leverage and Deepening Business Cycle Skewness. American Economic Journal: Macroeconomics. 2020;12/1:245-281.

Author

Santoro, Emiliano ; Jensen, Henrik ; Ravn, Søren Hove ; Petrella, Ivan. / Leverage and Deepening Business Cycle Skewness. I: American Economic Journal: Macroeconomics. 2020 ; Bind 12/1. s. 245-281.

Bibtex

@article{b73cfa393fae4a00a11f42cbf2a72e88,
title = "Leverage and Deepening Business Cycle Skewness",
abstract = "We document that the United States and other G7 economies have been characterized by an increasingly negative business-cycle asymmetry over the last three decades. This finding can be explained by the concurrent increase in the financial leverage of households and firms. To support this view, we devise and estimate a dynamic general equilibrium model with collateralized borrowing and occasionally binding credit constraints. Improved access to credit increases the likelihood that financial constraints become nonbinding in the face of expansionary shocks, allowing agents to freely substitute intertemporally. Contractionary shocks, however, are further amplified by drops in collateral values, since constraints remain binding. As a result, booms become progressively smoother and more prolonged than busts. Finally, in line with recent empirical evidence, financially driven expansions lead to deeper contractions, as compared with equally-sized nonfinancial expansions.",
author = "Emiliano Santoro and Henrik Jensen and Ravn, {S{\o}ren Hove} and Ivan Petrella",
year = "2020",
language = "English",
volume = "12/1",
pages = "245--281",
journal = "American Economic Journal: Macroeconomics",
issn = "1945-7707",
publisher = "American Economic Association",

}

RIS

TY - JOUR

T1 - Leverage and Deepening Business Cycle Skewness

AU - Santoro, Emiliano

AU - Jensen, Henrik

AU - Ravn, Søren Hove

AU - Petrella, Ivan

PY - 2020

Y1 - 2020

N2 - We document that the United States and other G7 economies have been characterized by an increasingly negative business-cycle asymmetry over the last three decades. This finding can be explained by the concurrent increase in the financial leverage of households and firms. To support this view, we devise and estimate a dynamic general equilibrium model with collateralized borrowing and occasionally binding credit constraints. Improved access to credit increases the likelihood that financial constraints become nonbinding in the face of expansionary shocks, allowing agents to freely substitute intertemporally. Contractionary shocks, however, are further amplified by drops in collateral values, since constraints remain binding. As a result, booms become progressively smoother and more prolonged than busts. Finally, in line with recent empirical evidence, financially driven expansions lead to deeper contractions, as compared with equally-sized nonfinancial expansions.

AB - We document that the United States and other G7 economies have been characterized by an increasingly negative business-cycle asymmetry over the last three decades. This finding can be explained by the concurrent increase in the financial leverage of households and firms. To support this view, we devise and estimate a dynamic general equilibrium model with collateralized borrowing and occasionally binding credit constraints. Improved access to credit increases the likelihood that financial constraints become nonbinding in the face of expansionary shocks, allowing agents to freely substitute intertemporally. Contractionary shocks, however, are further amplified by drops in collateral values, since constraints remain binding. As a result, booms become progressively smoother and more prolonged than busts. Finally, in line with recent empirical evidence, financially driven expansions lead to deeper contractions, as compared with equally-sized nonfinancial expansions.

M3 - Journal article

VL - 12/1

SP - 245

EP - 281

JO - American Economic Journal: Macroeconomics

JF - American Economic Journal: Macroeconomics

SN - 1945-7707

ER -

ID: 213542338