Nuño, Galo; Thomas, Carlos - European Central Bank - 2013
of collateralized risky debt. The presence of moral hazard creates a link between the volatility in bank asset returns … and bank leverage. We find that, while standard TFP shocks fail to replicate the volatility and cyclicality of leverage …, volatility shocks are relatively successful in doing so. JEL Classification: E20, G10, G21 …