Macrofinancial History and the New Business Cycle Facts Workshop on - PowerPoint PPT Presentation

Macrofinancial History and the New Business Cycle Facts Workshop on Estimating and Interpreting Financial Cycles De Nederlandsche Bank, September 2, 2016 Disclaimer: The views expressed herein are solely the responsibility of the authors and should not be interpreted as reflecting the views of the Federal Reserve Bank of San Francisco or the Board of Governors of the Federal Reserve System. 1/28 Moritz Schularick † Alan M. Taylor § Òscar Jordà ⋆ ⋆ Federal Reserve Bank of San Francisco; University of California, Davis † University of Bonn; CEPR § University of California, Davis; NBER; CEPR

Motivation Key questions Why a new collection of stylized facts? Need better models of real-financial interactions What do we know about the comovement of real and financial variables over the cycle? How have these relationships changed with financialization, especially since WW2? 2/28

Contribution and takeaways Contribution: New macrofinancial data set Takeaways : more credit and domestic cyclical behavior: more credit: good and bad stable growth, but more disasters more procyclicality, less smoothing more credit and the international economy: lower relative domestic/international volatility but higher global risk less international diversification more EX-IM volatility, but less CA volatility 3/28

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What is new about the data? 17 advanced economies annual since 1870 25 real and nominal variables. New: bank credit to non-financial sector: mortgages vs. non-mortgages; households vs. firms house prices equity prices Remarks: many series available but scattered: now one source 100+ pages online appendix with sources soon paper, data, and appendix at www.nber.org 5/28

6/28 Table 1 : A new macro-financial dataset. Available samples per variable and per country Country R. GDP N. GDP Cons. Inv. C. Acc. Gov. Exp. Gov. Rev. CPI Nw. mon. S. rate L. rate Stocks Ex. rate Pub. debt Bank lend. Mort. lend. Australia 1870 – 2013 1870 – 2014 1901 – 2013 1870 – 1946 1870 – 2014 1902 – 2013 1902 – 2013 1870 – 2013 1870 – 2014 1870 – 1944 1870 – 2014 1870 – 2014 1870 – 2014 1870 – 2014 1870 – 1945 1870 – 1945 1949 – 2013 1948 – 2014 1948 – 2014 1952 – 2014 Belgium 1870 – 2013 1870 – 1913 1913 – 2013 1900 – 1913 1870 – 1913 1870 – 1912 1870 – 1912 1870 – 1914 1877 – 1913 1870 – 1914 1870 – 1912 1870 – 2013 1870 – 2014 1870 – 1913 1885 – 1913 1885 – 1913 1920 – 1939 1920 – 1939 1919 – 2014 1920 – 1939 1920 – 2014 1920 – 1939 1920 – 1940 1920 – 2014 1920 – 2014 1920 – 1939 1920 – 1940 1920 – 1939 1946 – 2014 1941 1941 – 2013 1945 – 2014 1947 – 2014 1946 – 1979 1950 – 2014 1950 – 2014 1943 1982 – 2014 1946 – 2014 Canada 1870 – 2013 1871 – 1938 1871 – 2013 1871 – 2014 1870 – 1945 1870 – 2014 1870 – 2014 1870 – 2014 1871 – 2014 1934 – 1944 1870 – 2014 1870 – 2014 1870 – 2014 1870 – 2014 1870 – 2013 1874 – 2013 1948 – 2014 1948 – 2014 1948 – 2014 Switzerland 1870 – 2013 1870 – 2014 1870 – 2013 1870 – 1913 1921 – 1939 1870 – 2013 1870 – 2013 1870 – 2014 1870 – 2014 1870 – 2014 1880 – 2014 1900 – 2014 1870 – 2014 1880 – 2014 1870 – 2013 1870 – 2013 1948 – 2014 1948 – 2014 Germany 1870 – 2013 1870 – 1944 1870 – 2013 1870 – 1913 1872 – 1913 1872 – 1913 1873 – 1915 1870 – 2014 1876 – 1913 1870 – 1914 1870 – 1921 1870 – 1914 1870 – 1944 1871 – 1913 1883 – 1920 1883 – 1919 1946 – 2014 1920 – 1939 1925 – 1938 1925 – 1938 1925 – 1938 1924 – 1938 1919 – 1922 1924 – 1943 1918 – 1922 1946 – 2014 1927 – 1943 1924 – 1940 1924 – 1940 1948 – 2014 1948 – 2014 1950 – 2013 1950 – 2013 1951 – 2011 1924 – 1944 1948 – 2014 1924 – 2014 1950 – 2008 1946 – 2013 1949 – 2013 1950 – 2014 Denmark 1870 – 2013 1870 – 2014 1870 – 2013 1870 – 1914 1874 – 1914 1870 – 1935 1870 – 1935 1870 – 2014 1870 – 1945 1875 – 2014 1870 – 2014 1914 – 2014 1870 – 2014 1880 – 1946 1870 – 2014 1875 – 2014 1922 – 2014 1921 – 2013 1937 – 2013 1954 – 2013 1950 – 2014 1953 – 1956 1960 – 1996 1998 – 2014 Spain 1870 – 2013 1870 – 2014 1870 – 2014 1870 – 2014 1870 – 1913 1870 – 1935 1870 – 1935 1880 – 2014 1874 – 1935 1883 – 1914 1870 – 1936 1870 – 2014 1870 – 2014 1880 – 1935 1900 – 1935 1904 – 1935 1931 – 1934 1940 – 2014 1940 – 2014 1941 – 2011 1920 – 2014 1940 – 2014 1940 – 2014 1946 – 2013 1946 – 2013 1940 – 2013 Finland 1870 – 2013 1870 – 2014 1870 – 2014 1870 – 2014 1870 – 2014 1882 – 2014 1882 – 2014 1870 – 2014 1870 – 2014 1870 – 2013 1870 – 1938 1912 – 2014 1870 – 2014 1914 – 2014 1870 – 2013 1927 – 2013 1948 – 2014 France 1870 – 2013 1870 – 1913 1870 – 2014 1870 – 1918 1870 – 1913 1870 – 2014 1870 – 2014 1870 – 2014 1870 – 1913 1870 – 1914 1870 – 2014 1870 – 2014 1870 – 2014 1880 – 1913 1900 – 1938 1870 – 1933 1920 – 1938 1920 – 1944 1919 – 1939 1920 – 2011 1920 – 2014 1922 – 2013 1920 – 1938 1946 – 2014 1946 – 2014 1950 – 2014 1946 – 2014 1948 – 2014 1949 – 2014 UK 1870 – 2013 1870 – 2014 1870 – 2013 1870 – 2014 1870 – 2014 1870 – 2014 1870 – 2014 1870 – 2014 1870 – 2014 1870 – 2014 1870 – 2014 1870 – 2013 1870 – 2014 1870 – 2014 1880 – 2013 1880 – 2013 Italy 1870 – 2013 1870 – 2014 1870 – 2013 1870 – 2013 1870 – 2013 1870 – 2014 1870 – 2014 1870 – 2013 1870 – 2014 1885 – 1914 1870 – 2014 1906 – 2013 1870 – 2014 1870 – 2014 1870 – 2014 1870 – 2014 1922 – 2014 Japan 1870 – 2013 1875 – 1944 1874 – 2013 1885 – 1944 1870 – 1944 1870 – 2013 1870 – 2013 1870 – 2014 1873 – 2014 1879 – 1938 1870 – 2014 1900 – 2013 1870 1875 – 1944 1874 – 2014 1893 – 1940 1946 – 2013 1946 – 2014 1946 – 2013 1957 – 2014 1873 – 2014 1946 – 2014 1946 – 2014 Netherlands 1870 – 2013 1870 – 1913 1870 – 2013 1870 – 1913 1870 – 1913 1870 – 2014 1870 – 2013 1870 – 2013 1870 – 1941 1870 – 1914 1870 – 2013 1890 – 1944 1870 – 2014 1870 – 1939 1900 – 2013 1900 – 2013 1921 – 1939 1921 – 1939 1921 – 1939 1945 – 2014 1919 – 1944 1946 – 2014 1946 – 2014 1945 – 2014 1948 – 2014 1948 – 2013 1948 – 2014 Norway 1870 – 2013 1870 – 1939 1870 – 2013 1870 – 1939 1870 – 1939 1870 – 2014 1870 – 1943 1870 – 2014 1870 – 2014 1870 – 1965 1870 – 2013 1914 – 2014 1870 – 2014 1880 – 1939 1870 – 2014 1870 – 2013 1946 – 2013 1946 – 2013 1946 – 2013 1949 – 2014 1967 – 2015 1947 – 2013 Portugal 1870 – 2013 1870 – 2014 1910 – 2013 1953 – 2014 1870 – 2014 1870 – 2014 1870 – 2014 1870 – 2014 1870 – 2014 1880 – 2014 1870 – 2013 1929 – 2013 1870 – 2014 1870 – 2014 1870 – 1903 1920 – 2013 1920 – 2013 Sweden 1870 – 2013 1870 – 2014 1870 – 2013 1870 – 2014 1870 – 2014 1870 – 2014 1870 – 2014 1870 – 2014 1871 – 2013 1870 – 2013 1870 – 2014 1870 – 2014 1870 – 2014 1870 – 2014 1871 – 2013 1871 – 2013 USA 1870 – 2013 1870 – 2014 1870 – 2013 1870 – 2014 1870 – 2014 1870 – 2014 1870 – 2014 1870 – 2014 1870 – 2014 1870 – 2014 1870 – 2014 1870 – 2014 1870 – 2014 1870 – 2014 1880 – 2014 1880 – 2014

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The Great Leveraging And the incidence of financial crises 8/28 1.2 8 1 Number of 17 countries in crisis Total loans Ratio of bank lending to GDP 6 .8 Broad money 4 .6 .4 2 .2 0 0 1870 1880 1890 1900 1910 1920 1930 1940 1950 1960 1970 1980 1990 2000 2010

The Great Mortgaging 9/28 .8 .6 Ratio of bank lending to GDP .4 Nonmortgage lending .2 Mortgage lending 0 1870 1880 1890 1900 1910 1920 1930 1940 1950 1960 1970 1980 1990 2000 2010

The housing hockey stick Real house prices 10/28 2 1.5 Real house prices 1 .5 0 1870 1880 1890 1900 1910 1920 1930 1940 1950 1960 1970 1980 1990 2000 2010

Owner occupied share of housing 30 67 55 39 63 1990 51 64 58 59 68 47 39 63 1980 48 63 50 29 31 64 45 2013 60 65 64 37 82 58 45 69 60 55 67 69 35 80 56 45 66 2000 50 36 in percent 47 1940 48 1930 46 23 1920 46 1910 1900 32 Avg. U.S. U.K. CHE ITA FRA GER CAN 57 44 60 66 1970 46 62 42 34 45 41 34 1960 1950 43 47 32 37 40 38 39 66 11/28

Leveraging whichever way you measure it Average: U.S., U.K., Germany, and France Mortgages, housing wealth 12/28 Total lending, total wealth 1.25 6.00 1.25 3.00 Loans/GDP Mortgages/GDP Loans/Wealth Mortgages/Housing Wealth 5.00 2.50 Wealth/GDP (right axis) Housing Wealth/GDP (right axis) 1.00 1.00 4.00 2.00 0.75 0.75 3.00 1.50 0.50 0.50 2.00 1.00 0.25 0.25 1.00 0.50 0.00 0.00 0.00 0.00 1950 1970 1990 2010 1950 1970 1990 2010

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