Leveraged: The New Economics of Debt and Financial FragilityMoritz Schularick An authoritative guide to the new economics of our crisis-filled century. Published in collaboration with the Institute for New Economic Thinking. The 2008 financial crisis was a seismic event that laid bare how financial institutions’ instabilities can have devastating effects on societies and economies. COVID-19 brought similar financial devastation at the beginning of 2020 and once more massive interventions by central banks were needed to heed off the collapse of the financial system. All of which begs the question: why is our financial system so fragile and vulnerable that it needs government support so often? For a generation of economists who have risen to prominence since 2008, these events have defined not only how they view financial instability, but financial markets more broadly. Leveraged brings together these voices to take stock of what we have learned about the costs and causes of financial fragility and to offer a new canonical framework for understanding it. Their message: the origins of financial instability in modern economies run deeper than the technical debates around banking regulation, countercyclical capital buffers, or living wills for financial institutions. Leveraged offers a fundamentally new picture of how financial institutions and societies coexist, for better or worse. The essays here mark a new starting point for research in financial economics. As we muddle through the effects of a second financial crisis in this young century, Leveraged provides a road map and a research agenda for the future. |
Other editions - View all
Common terms and phrases
aggregate American Economic Review Andrei Shleifer arbitrage asset price average bank capital banking crises boom and bust Bordalo Business Cycles capital ratios commercial banks corporate bond countries crash credit booms credit cycles credit expansions credit growth credit market credit spreads credit supply credit/gdp declines default deposits Egon Zakrajšek episodes evidence expectations Experian Fahlenbrach Federal Reserve figure financial crisis Financial Economics forecast foreclosure fraction of investors Gennaioli higher house price household debt incentives income increase interest rate investment investor activity Jordà Journal of Economics Journal of Financial Krishnamurthy Laeven lenders lending leverage liquidity loans macroeconomic measures Mian models Monetary mortgages narrative NBER Working Paper nonfinancial noninvestors nontradable panel peak portfolio predict price of risk private debt booms Quarterly Journal real estate real GDP recession regressions rise risk aversion risk exposure risk premiums role Romer sample share shareholders Shleifer stock market Sufi Taylor Verner Xiong