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The Leverage Cycle

Cowles Foundation Discussion Paper No. 1715

55 Pages Posted: 5 Aug 2009

See all articles by John Geanakoplos

John Geanakoplos

Yale University; Santa Fe Institute

Multiple version iconThere are 2 versions of this paper

Date Written: July 31, 2009

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: E3, E32, G01, G12

Suggested Citation

Geanakoplos, John D, The Leverage Cycle (July 31, 2009). Cowles Foundation Discussion Paper No. 1715, Available at SSRN: https://ssrn.com/abstract=1441943 or http://dx.doi.org/10.2139/ssrn.1441943

John D Geanakoplos (Contact Author)

Yale University ( email )

30 Hillhouse Avenue
New Haven, CT 06511
United States
203-432-3397 (Phone)

HOME PAGE: http://https://economics.yale.edu/people/faculty/john-geanakoplos

Santa Fe Institute ( email )

1399 Hyde Park Road
Santa Fe, NM 87501
United States

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