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Apalancamiento, ciclo financiero y económico
[Leverage, financial and business cycles]

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  • Valdivia Coria, Joab Dan

Abstract

This paper provides pioneering estimates of the impact of loan-to-value (LTV) ratios, also known as leverage, on economic growth in Bolivia. The analysis reveals the pro-cyclicality between the economic and financial cycles, confirming the stylized facts. We emphasize the significance of recognizing the interplay between these cycles to attain greater stability and foster economic growth. The findings suggest that shocks in the loan-to-value (LTV) ratios trigger a rise in housing prices and greater consumption by entrepreneurs, leading to an increase in economic growth and employment levels. However, we also confirm the notion that leverage can be a double-edged tool, as its excessive utilization can disrupt markets and destabilize the overall economy.

Suggested Citation

  • Valdivia Coria, Joab Dan, 2022. "Apalancamiento, ciclo financiero y económico [Leverage, financial and business cycles]," MPRA Paper 116849, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:116849
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    References listed on IDEAS

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    More about this item

    Keywords

    Real bussines cycles (RBC); financial frictions; loan to value (LTV); bayesian estimation.;
    All these keywords.

    JEL classification:

    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy

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