Fed paper examines drivers of US leverage

The US Federal Reserve

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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