fragility of the entire financial system by allowing banks and other intermediaries to “leverage up” by buying one another … leverage of market-based financial intermediaries. Growth in the balance sheets of these intermediaries provides a sense of the … availability of credit, while contractions of their balance sheets have tended to precede the onset of financial crises …

This paper studies the question of the economic scale of financial institutions. We show that banks actively smooth … of financial institutions leads to procyclical book leverage, while market leverage is nearly entirely reflective of …'s subdued growth rate relative to pre-crisis levels. Market volatility dampens the intermediary leverage cycle. We draw …

We develop a theory of financial intermediary leverage cycles in the context of a dynamic model of the macroeconomy … dynamics of the economy: the net worth and the leverage of financial intermediaries. The leverage of the intermediaries is … procyclical, owing to risk-sensitive funding constraints. Relative to an economy with constant leverage, financial intermediaries …

. Empirically, we find that intermediary leverage is negatively aligned with the banks’ value-at-risk (VaR). Motivated by the …The availability of credit varies over the business cycle through shifts in the leverage of financial intermediaries …