NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Macrofinancial History and the New Business Cycle Facts

Òscar Jordà, Moritz Schularick, Alan M. Taylor

NBER Working Paper No. 22743
Issued in October 2016
NBER Program(s):Asset Pricing, Development of the American Economy, Economic Fluctuations and Growth, International Finance and Macroeconomics, Monetary Economics

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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Document Object Identifier (DOI): 10.3386/w22743

Published: Macrofinancial History and the New Business Cycle Facts, Òscar Jordà, Moritz Schularick, Alan M. Taylor. in NBER Macroeconomics Annual 2016, Volume 31, Eichenbaum and Parker. 2017

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