Leverage and Macroeconomic Determinants: Evidence from Ukraine

Macroeconomic Uncertainty and Firm Leverage

This paper investigates the link between the optimal level of nonfinancial firms’ leverage and macroeconomic uncertainty. We develop a structural model of a firm’s value maximization problem that predicts that as macroeconomic uncertainty increases the firm will decrease its optimal level of borrowing. We test this proposition using a panel of non–financial US firms drawn from the COMPUSTAT qua...

Determinants of Firm Leverage: Further Evidence from China

Bank Leverage Regulation and Macroeconomic Dynamics

Regulatory constraints on bank leverage have been at the center of many policy discussions recently. One important question to emerge from these discussions has been whether these regulations should be time-dependent and how they would interact with the business cycle. We analyze this question using a dynamic stochastic general equilibrium model with banks and bank capital. In the model, bank c...

Household leverage, housing markets, and macroeconomic fluctuations

This paper examines implications of housing and household leverage on macroeconomic fluctuations under credit shocks in the presence of the zero lower bound (ZLB) on nominal interest rates. To this end, I build a housing model by incorporating houses into a standard deleveraging model and allow debt limits to be endogenous. I find that, under an adverse credit shock, only with high leverage can...

Financial Intermediation, Leverage, and Macroeconomic Instability

This paper investigates how financial-sector leverage affects macroeconomic instability and welfare. In the model, banks borrow (use leverage) to allocate resources to productive projects and provide liquidity. When banks do not actively issue new equity, aggregate outcomes depend on the level of equity in the financial sector. Equilibrium is inefficient because agents do not internalize how th...