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dc.contributor.authorAdrian, Tobiasen_US
dc.contributor.authorBoyarchenko, Ninaen_US
dc.date.accessioned2012-08-28en_US
dc.date.accessioned2012-09-20T13:06:06Z-
dc.date.available2012-09-20T13:06:06Z-
dc.date.issued2012en_US
dc.identifier.urihttp://hdl.handle.net/10419/62944-
dc.description.abstractWe develop a theory of financial intermediary leverage cycles in the context of a dynamic model of the macroeconomy. The interaction between a production sector, a financial intermediation sector, and a household sector gives rise to amplification of fundamental shocks that affect real economic activity. The model features two state variables that represent the dynamics of the economy: the net worth and the leverage of financial intermediaries. The leverage of the intermediaries is procyclical, owing to risk-sensitive funding constraints. Relative to an economy with constant leverage, financial intermediaries generate higher output and consumption growth and lower consumption volatility in normal times, but at the cost of systemic solvency and liquidity risks. We show that tightening intermediaries' risk constraints affects the systemic risk-return trade-off by lowering the likelihood of systemic crises at the cost of higher pricing of risk. Our model thus represents a conceptual framework for cyclical macroprudential policies within a dynamic stochastic general equilibrium model.en_US
dc.language.isoengen_US
dc.publisherFederal Reserve Bank of New York New York, NYen_US
dc.relation.ispartofseriesStaff Report, Federal Reserve Bank of New York 567en_US
dc.subject.jelG00en_US
dc.subject.jelG28en_US
dc.subject.jelE32en_US
dc.subject.jelE02en_US
dc.subject.ddc330en_US
dc.subject.keywordsystemic risken_US
dc.subject.keywordmacroprudential policyen_US
dc.subject.keywordDSGEen_US
dc.subject.keywordamplificationen_US
dc.subject.keywordcapital regulationen_US
dc.subject.keywordfinancial intermediationen_US
dc.titleIntermediary leverage cycles and financial stabilityen_US
dc.typeWorking Paperen_US
dc.identifier.ppn722365578en_US
dc.rightshttp://www.econstor.eu/dspace/Nutzungsbedingungenen_US
Appears in Collections:Staff Reports, Federal Reserve Bank of New York

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