Good News is Bad News: Leverage Cycles and Sudden Stops

Research, Preprint OPEN
Ozge Akinci; Ryan Chahrour; (2014)
  • Publisher: New York, NY: Federal Reserve Bank of New York
  • Subject: leverage | F41 | News Shocks, Sudden Stops, Leverage, Boom-Bust Cycle | E32 | F44 | boom-bust cycle | G15 | sudden stops | news shocks; sudden stops; leverage; boom-bust cycle | news shocks
    • jel: jel:E32 | jel:F41 | jel:F44 | jel:G15
      ddc: ddc:330
    mesheuropmc: health care economics and organizations

We show that a model with imperfectly forecastable changes in future productivity and an occasionally binding collateral constraint can match a set of stylized facts about "sudden stop" events. "Good" news about future productivity raises leverage during times of expans... View more
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