Institutional supercycles: an evolutionary macro-finance approach

Figures & data

Figure 1. Macrofinancial Stability Index (MSI) and supercycles, US (1962-2019) and UK (1967-2019).

Note: The figure depicts the 5-year moving average of the MSI. The data sources are reported in Table A1.

Table 1. Two post-war supercycles.

		Industrial capitalism (IC) supercycle	Financial globalisation (FG) supercycle
Key feature		Financing expensive capital assets	Production and preservation of tradable financial assets
Basic cycle drivers		Fragile corporate balance sheets	Neorentier-driven fragile financial balance sheets
		Cyclical functional distribution	Global financial cycle
			Cyclical functional distribution
Thwarting mechanisms	Ceiling mechanisms	Glass-Steagall Act	Basel
		Bretton Woods	Monetarism/Inflation targeting
		Wage-price consensus
	Floor mechanisms	Wage policy	Export-led growth
		Fiscal policy	Debt-led growth
		Industrial policy	Lender of last resort
		Welfare state
		Accommodative banking system/Lender of last resort
Causes of erosion	Innovations	Eurodollar markets	Shadow banking
			Collateral-based liquidity provision
	Long-run processes	Growing bargaining power of workers	Growing private debt accumulation
		Productivity slowdown
		Declining US trade balance

Table A1. Variables and data sources used for the construction of the Macrofinancial Stability Index (MSI).

Variable	Data sources	Definition/remarks
Floor variables
Economic growth	OECD [Canada, France, Germany, Italy, Japan, UK] and FRED [US]	̶
Employment rate	OECD	Defined as 1 minus the unemployment rate.
Share price growth	OECD	Growth rate of a share price index estimated by OECD. The index is calculated from the prices of common shares of companies traded on national or foreign stock exchanges.
Ceiling variables
Credit-to-GDP ratio	BIS	The credit to the non-financial sector is used.
Current account deficit-to-GDP ratio	Jordà et al. (2017) [Canada: −1980; Germany:−1990; France:−1998; Italy:−1994; Japan: −1995; UK:−1954;US:−1959] and OECD [Canada: 1981-2019; Germany:1991-2019; France: 1999-2019; Italy:1995-2019; Japan: 1996-2019; UK:1955-2019;US:1960-2019]	̶
Bank leverage ratio	Jordà et al. (2021)	Defined as the bank assets to capital ratio
Corridor variables
Inflation rate	OECD	Growth rate of the consumer price index.
House price growth rate	Jordà et al. (2017) [Canada, Germany, France, UK, US: −1970; Japan: −1960] and OECD [Canada, Germany, France, Italy, UK, US: 1971-2019; Japan: 1961-2019]	Growth rate of a house price indicator that captures how residential property prices change over time.

Figure A1. Macrofinancial Stability Index (MSI) and supercycles, Canada (1966-2019), France (1973-2019), Italy (1975-2019) and Japan (1975-2019). Note: The figure depicts the 5-year moving average of the MSI. The data sources are reported in Table A1.

Figure A2. Macrofinancial Stability Index (MSI) and supercycles, G7 countries (except for Germany), various starting years until 2019, supercycle-specific maximum, minimum and median values. Note: The figure depicts the 5-year moving average of the MSI. The data sources are reported in Table A1.

Jordà, Ò, Schularick, M., and Taylor, A.M., 2017. Macrofinancial history and the new business cycle facts. In: M. Eichenbaum, and J. A. Parker, eds. NBER macroeconomics annual 2016. Chicago: University of Chicago Press.

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Jordà, Ò, et al., 2021. Bank capital redux: solvency, liquidity, and crisis. The Review of economic studies, 88 (1), 260–286.

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