CFDP 1715R

The Leverage Cycle

Author(s): 
John Geanakoplos

Publication Date: July 2009

Revision Date: January 2010

Pages: 57

Abstract: 

Equilibrium determines leverage, not just interest rates. Variations in leverage cause fluctuations in asset prices. This leverage cycle can be damaging to the economy, and should be regulated.

Keywords: 

Leverage, Collateral, Cycle, Crisis, Regulation

JEL Classification Codes:  E3, E32, G01, G12

See CFP: 1304