Back to basics : At the micro-economic level, deleveraging refers to the reduction of the leverage ratio, or the percentage of debt in the balance sheet of a single economic entity, such as a household or a firm. It is the opposite of leveraging, which is the practice of borrowing money to acquire assets and multiply gains and losses. At the macro-economic level, deleveraging of an economy refers to the simultaneous reduction of debt levels in multiple sectors, including private sectors and the government sector. It is usually measured as a decline of the total debt to GDP ratio in the national account. The deleveraging of an economy following a financial crisis has significant macro-economic consequences and is often associated with severe recessions.
Posted on: Sat, 27 Dec 2014 21:22:19 +0000
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