|
|
|
|
||||
|
||||
Liquidity and LeverageTobias AdrianFederal Reserve Bank of New York Hyun Song ShinPrinceton University - Department of Economics January 1, 2009 FRB of New York Staff Report No. 328 Abstract: In a financial system in which balance sheets are continuously marked to market, asset price changes appear immediately as changes in net worth, eliciting responses from financial intermediaries who adjust the size of their balance sheets. We document evidence that marked-to-market leverage is strongly procyclical. Such behavior has aggregate consequences. Changes in dealer repos—the primary margin of adjustment for the aggregate balance sheets of intermediaries—forecast changes in financial market risk as measured by the innovations in the Chicago Board Options Exchange Volatility Index (VIX). Aggregate liquidity can be seen as the rate of change of the aggregate balance sheet of the financial intermediaries.
Number of Pages in PDF File: 39 Keywords: financial market liquidity, financial cycles, financial intermediary leverage JEL Classification: E32, E44, G10, G20 working papers seriesDate posted: June 4, 2008 ; Last revised: November 11, 2010Suggested CitationContact Information
|
|
|||||||||||||||||||||||||||||
© 2013 Social Science Electronic Publishing, Inc. All Rights Reserved.
FAQ
Terms of Use
Privacy Policy
Copyright
This page was processed by apollo8 in 1.751 seconds
