Optimal Leverage, its Benefits, and the Business Cycle

Leverage Restrictions in a Business Cycle Model

We modify an otherwise standard medium-sized DSGE model, in order to study the macroeconomic e§ects of placing leverage restrictions on financial intermediaries. The financial intermediaries (‘bankers’) in the model must exert e§ort in order to earn high returns for their creditors. An agency problem arises because banker e§ort is not observable to creditors. The consequence of this agency prob...

Reviewing the Leverage Cycle

We review the theory of leverage developed in collateral equilibrium models with incomplete markets. We explain how leverage tends to boost asset prices, and create bubbles. We show how leverage can be endogenously determined in equilibrium, and how it depends on volatility. We describe the dynamic feedback properties of leverage, volatility, and asset prices, in what we call the Leverage Cycle...

Business Cycle Features In The Iranian Economy

Endogenous Collateral Constraints and the Leverage Cycle

We review the theory of leverage developed in collateral equilibrium models with incomplete markets. We explain how leverage tends to boost asset prices and create bubbles. We show how leverage can be endogenously determined in equilibrium and how it depends on volatility. We describe the dynamic feedback properties of leverage, volatility, and asset prices, in what we call the leverage cycle, ...

the leverage cycle , deFault , and ForecloSure

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