Liquidity and financial cycles
Published
2008
Publisher
Bank for International Settlements
Description
In a financial system where balance sheets are continuously marked to market, asset price changes show up immediately in changes in net worth, and elicit responses from financial intermediaries, who adjust the size of their balance sheets. We document evidence that marked to market leverage is strongly procyclical. Such behaviour has aggregate consequences. Changes in aggregate balance sheets for intermediaries forecast changes in risk appetite in financial markets, as measured by the innovations in the VIX index. Aggregate liquidity can be seen as the rate of change of the aggregate balance sheet of the financial intermediaries.
Frequently Asked Questions
Who is the author of Liquidity and financial cycles?
Liquidity and financial cycles was written by Tobias Adrian.
When was Liquidity and financial cycles published?
The publication date for this specific edition is 2008. The original work may have been published on a different date.