Macrofinancial History and the New Business Cycle Facts

Òscar Jordà, Moritz Schularick, Alan M. Taylor

Chapter in NBER book NBER Macroeconomics Annual 2016, Volume 31 (2017), Martin Eichenbaum and Jonathan A. Parker, editors (p. 213 - 263)
Conference held April 15-16, 2016
Published in May 2017 by University of Chicago Press
© 2017 by the National Bureau of Economic Research
in NBER Book Series NBER Macroeconomics Annual

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 beyond 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 financial 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.

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This paper was revised on May 31, 2016

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This chapter first appeared as NBER working paper w22743, Macrofinancial History and the New Business Cycle Facts, Òscar Jordà, Moritz Schularick, Alan M. Taylor
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