We present cross-country evidence that a country's macroeconomic volatility, measured either by the standard deviation … volatility in postwar periods. Robustness checks reveal that the effect of this historical variable on volatility remains … that the state history variable is more important in countries with a higher level of macroeconomic volatility. …

. Second, fluctuations in total asset volatility, rather than fluctuations in leverage, appear to drive most of the variation …