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Leverage and Deepening Business Cycle Skewness

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Standard

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

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

Publikation: Bidrag til tidsskriftTidsskriftartikelForskningfagfællebedømt

Harvard

Jensen, H, Petrella, I, Ravn, SH & Santoro, E 2020, 'Leverage and Deepening Business Cycle Skewness', American Economic Journal: Macroeconomics, bind 12, nr. 1, s. 245-281. https://doi.org/10.1257/mac.20170319

APA

Jensen, H., Petrella, I., Ravn, S. H., & Santoro, E. (2020). Leverage and Deepening Business Cycle Skewness. American Economic Journal: Macroeconomics, 12(1), 245-281. https://doi.org/10.1257/mac.20170319

Vancouver

Jensen H, Petrella I, Ravn SH, Santoro E. Leverage and Deepening Business Cycle Skewness. American Economic Journal: Macroeconomics. 2020;12(1):245-281. https://doi.org/10.1257/mac.20170319

Author

Jensen, Henrik ; Petrella, Ivan ; Ravn, Søren Hove ; Santoro, Emiliano. / Leverage and Deepening Business Cycle Skewness. I: American Economic Journal: Macroeconomics. 2020 ; Bind 12, Nr. 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 = "Henrik Jensen and Ivan Petrella and Ravn, {S{\o}ren Hove} and Emiliano Santoro",
year = "2020",
doi = "10.1257/mac.20170319",
language = "English",
volume = "12",
pages = "245--281",
journal = "American Economic Journal: Macroeconomics",
issn = "1945-7707",
publisher = "American Economic Association",
number = "1",

}

RIS

TY - JOUR

T1 - Leverage and Deepening Business Cycle Skewness

AU - Jensen, Henrik

AU - Petrella, Ivan

AU - Ravn, Søren Hove

AU - Santoro, Emiliano

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.

U2 - 10.1257/mac.20170319

DO - 10.1257/mac.20170319

M3 - Journal article

VL - 12

SP - 245

EP - 281

JO - American Economic Journal: Macroeconomics

JF - American Economic Journal: Macroeconomics

SN - 1945-7707

IS - 1

ER -

ID: 213542338