We assess the quantitative implications of collateral re-use on leverage, volatility, and welfare within an infinite … used to back more transactions. Re-use thus contributes to the buildup of leverage and significantly increases volatility in … agents to share risk more effectively. Allowing re-use beyond intermediate levels, however, can lead to excessive leverage and …

a constraint on leverage as in Gertler and Kiyotaki (2010). We show that a mere increase in the probability of firms … framework a constraint on leverage induces countercyclical risk premia in equity markets even when it does not bind. …

leverage and asset volatility. We conclude that the bilateral cross-sector exposures in the euro area financial system … financial intermediaries playing a key role in the processes. High financial leverage and high asset volatility are found to …