XXVI Edition

14-15-16 December 2017"

Leverage—A Broader View

SINGH MANMOHAN , International Monetary Fund

Research and policy debates on monetary policy, financial stablity and regulations encompass the overall financial system where nonbanks/banks fund each other. However,we find the traditional use of the leverage metric to be myopic as it reflects only bank balance sheet data. We focus on off-balance sheet financing via pledged collateral since it straddles nonbank leverage, and suggest that a broader view on leverage maybe useful to consider. The paper also discusses the new regulations that attempts to align the leverage metric globally, and associated econometric issues for empirical work. From a policy perspective, the paper also integrates the broader leverage metric to seminal research that has been done in this area.

Area: Capital Structure and Corporate Finance

Keywords: Keywords:regulations; financial stability; leverage ratio; off balance sheet; pledged collateral

Paper file

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