Sticky Leverage

Gomes, Jacqueline Ramos de Andrade Antunes; Jermann, Urban J.; Schmid, Lukas

doi:10.1257/aer.20130952

Cited by 159 publications

(98 citation statements)

References 26 publications

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“…While our focus is on households, Gomes et al (2014) offer a complementary view focusing on firms. They show how inflation movements affect investment and output if firms have longterm debt.…”

Section: Introductionmentioning

confidence: 99%

Leaning Against the Credit Cycle

Gelain

Lansing

Natvik

2017

ERWP

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How should a central bank act to stabilize the debt-to-GDP ratio? We show how the persistent nature of household debt shapes the answer to this question. In environments where households repay mortgages gradually, surprise interest hikes only weakly influence household debt, and tend to increase debt-to-GDP in the short run while reducing it in the medium run. Interest rate rules with a positive weight on debt-to-GDP cause indeterminacy. Compared to inflation targeting, debt-to-GDP stabilization calls for a more expansionary policy when debtto-GDP is high, so as to deflate the debt burden through inflation and output growth.

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Section: Introductionmentioning

confidence: 99%

Leaning Against the Credit Cycle

Gelain

Lansing

Natvik

2017

ERWP

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“…Because the share ω is not properly identified in the sunspot economy, we choose to set its value to 0.7, using the time series constructed by Vickery (2008) as an help to guide our calibration. 22 However, we have checked that our estimation results remain similar under different values for ω.…”

Section: Estimated Parametersmentioning

confidence: 79%

“…Then the borrower increases consumption and land investment L t+1 . In addition to being a shifter of credit demand through the collateral channel -see (21) -L t+1 is also a shifter of credit supply through land reallocation to the borrower -see (22).…”

Section: Dissecting the Mechanism: Self-fulfilling Countercyclical Chmentioning

confidence: 99%

“…See for example http://www.loomissayles.com/internet/internetdata.nsf/id/8yaj9c/ $file/bankloans-lookingbeyondinterestrateexpectations.pdf. 22 It is not difficult to see that our hybrid economy's moments depend on ω only in the determinacy regime. In a nutshell, this happens because ω affects the set of unstable eigenvalues and the linear saddle-path solution used to solve the determinate model, and this is why ω is identified when estimating the determinate model.…”

Section: Estimated Parametersmentioning

confidence: 99%

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Specification and Estimation of Bayesian Dynamic Factor Models: A Monte Carlo Analysis with an Application to Global House Price Comovement

Young¹,

Kose²,

Otrok³

et al. 2015

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The interest rate at which US firms borrow funds has two features: (i) it moves in a countercyclical fashion and (ii) it is an inverted leading indicator of real economic activity: low interest rates forecast booms in GDP, consumption, investment, and employment. We show that a Kiyotaki-Moore model accounts for both properties when business-cycle movements are driven, in a significant way, by animal spirit shocks to creditfinanced investment demand. The credit-based nature of such self-fulfilling equilibria is shown to be essential: the dynamic correlation between current loanable funds rate and future aggregate economic activity depends critically on the property that the loan has a variable-rate component. In addition, Bayesian estimation of our benchmark DSGE model on US data 1975US data -2010 shows that movements in investment driven by animal spirits are quantitatively important and result in a better fit to the data than both standard RBC models and Kiyotaki-Moore type models with unique equilibrium.

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“…2 Alternatively, in Gomes, Jermann, and Schmid (2016), firms are identical at the beginning of each period, but may default on a fraction of their long-term debt due to idiosyncratic shocks.…”

Section: Introductionmentioning

confidence: 99%

A Macroeconomic Model with Occasional Financial Crises

Paul

2019

ERWP

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Financial crises are born out of prolonged credit booms and depressed productivity. At times, they are initiated by relatively small shocks. Consistent with these empirical observations, this paper extends a standard macroeconomic model to include financial intermediation, long-term defaultable loans, and occasional financial crises. Within this framework, crises are typically preceded by prolonged boom periods. During such episodes, intermediaries expand their lending and leverage, thereby building up financial fragility. Crises are generally initiated by a moderate adverse shock that puts pressure on intermediaries' balance sheets, triggering a creditor run, a contraction in lending, and ultimately a deep and persistent recession.

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Sticky Leverage

Cited by 159 publications

References 26 publications

Leaning Against the Credit Cycle

Leaning Against the Credit Cycle

Specification and Estimation of Bayesian Dynamic Factor Models: A Monte Carlo Analysis with an Application to Global House Price Comovement

A Macroeconomic Model with Occasional Financial Crises

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