Fed paper examines drivers of US leverage
Economic growth can be major influence even without loose monetary policy, researchers say
A strong economy can drive financial imbalances even without the influence of loose monetary policy, a paper published by the Federal Reserve finds.
Elena Afanasyeva and her co-authors examine the relationship between macroeconomic performance and financial imbalances in the US from the 1960s to 2020. They employ a “structural approach” to separate the effects of macroeconomic conditions and loose monetary policy on non-financial leverage.
They find that aggregate supply and demand shocks and
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