Leverage Effect (Financial Amplification)
지렛대 효과
A phenomenon in which a small initial shock is amplified into a disproportionately large outcome through sequential transmission channels in financial markets. A typical structure unfolds as an FX shock triggering foreign selling → equity decline → margin calls → forced selling, cascading into an index collapse. Formally theorized as the 'financial accelerator' by Bernanke, Gertler, and Gilchrist (1996), the effect is especially pronounced in emerging markets through FX-to-equity transmission channels.
Sources
- Wikipedia (EN) Core definition and mechanism of the financial accelerator: small shocks amplified through deteriorating financial market conditions into large macroeconomic effects. Bernanke, Gertler & Gilchrist (1996) formulation.
- investopedia.com Accessible definition: feedback loop where financial market conditions amplify small economic changes, with credit conditions and the real economy reinforcing each other.