The years leading up to the "great recession" were a time of rapid innovation in the financial industry. This period also saw a fall in interest rates, and a boom in liquidity that accompanied the boom in real activity, especially investment. In this paper we argue that these were not unrelated...

The years leading up to the "great recession" were a time of rapid innovation in the financial industry. This period also saw a fall in credit spreads and a boom in liquidity and asset prices that accompanied the boom in real activity, especially investment. In this paper we argue that these...

Aggregate profits measured from NIPA data are over six times more volatile than output. We use recent estimates of the return on physical capital to decompose NIPA profits into the part that can be explained by capital income and a residual called net profits. We find that capital income...