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The model shows FVA in banks to be an accelerator that amplifies the financial cycle upswing.
This combination means that the financial cycle produces sustained booms and deep downturns.
Ms Rey reckons that these movements are indicators of a global financial cycle.
And it calls for significant adjustments to macroeconomic policies.What is this "financial cycle"?
This couple-of-hundred-thousand-dollar question is one that every LII – from babies to teenagers – asks every financial cycle.
For Mr Borio, the financial cycle has several salient features that often cause it to be ignored by mainstream economists.
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Yet financial cycles can go largely undetected.
The portfolio manager said she had weathered some tough financial cycles, "but this one has been uniquely disabling".
Following these items are discussions pertaining to the generation of cash and profit and the financial cycles of a business.
Economies can succumb to long "financial cycles", according to Claudio Borio and his colleagues at the Bank for International Settlements.
These trades will be profitable for the Treasury and they have the potential to smooth out the financial cycles that are the consequence of financial market irrationality.
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