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Embedded in canonical macroeconomic models is the assumption of frictionless financial markets, implying that the composition of borrowers' balance sheets has no effect on their spending decision. As a result, these models have a difficult time accounting for the feedback effects between...
Persistent link: https://www.econbiz.de/10013104755
To identify disruptions in credit markets, research on the role of asset prices in economic fluctuations has focused on the information content of various corporate credit spreads. We re-examine this evidence using a broad array of credit spreads constructed directly from the secondary bond...
Persistent link: https://www.econbiz.de/10012463785
Corporate bond spreads and the slope of the Treasury yield curve (that is, the term spread) are two financial indicators that are especially informative about the likelihood of an economic downturn over a medium-term horizon
Persistent link: https://www.econbiz.de/10014090001
In this paper we present a simple, theory-based measure of the variations in aggregate economic efficiency associated with business fluctuations. We decompose this indicator, which we refer to as 'the gap', into two constituent parts: a price markup and a wage markup, and show that the latter...
Persistent link: https://www.econbiz.de/10012469865
Using U.S. data from 1929 to 2013, we show that elevated credit-market sentiment in year t – 2 is associated with a decline in economic activity in years t and t + 1. Underlying this result is the existence of predictable mean reversion in credit-market conditions. That is, when our sentiment...
Persistent link: https://www.econbiz.de/10013001213
Using U.S. data from 1929 to 2015, we show that elevated credit-market sentiment in year t-2 is associated with a decline in economic activity in years t and t+1. Underlying this result is the existence of predictable mean reversion in credit-market conditions. When credit risk is aggressively...
Persistent link: https://www.econbiz.de/10012965855
Using U.S. data from 1929 to 2013, we show that elevated credit-market sentiment in year t-2 is associated with a decline in economic activity in years t through t 2. Underlying this result is the existence of predictable mean reversion in credit-market conditions. That is, when our sentiment...
Persistent link: https://www.econbiz.de/10012971778
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