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Author : Juan Carlos Ruiz-García
Publisher :
ISBN 13 :
Total Pages : pages
Book Rating : 4.:/5 (133 download)
Download or read book Financial Frictions, Firm Dynamics and the Aggregate Economy written by Juan Carlos Ruiz-García and published by . This book was released on 2021 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:
Author :
Publisher :
ISBN 13 : 9789150624359
Total Pages : 129 pages
Book Rating : 4.6/5 (243 download)
Download or read book Financial Frictions and Firm Dynamics written by and published by . This book was released on 2014 with total page 129 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Author : Paul R. Bergin
Publisher :
ISBN 13 :
Total Pages : 39 pages
Book Rating : 4.:/5 (879 download)
Download or read book Financial Frictions and Firm Dynamics written by Paul R. Bergin and published by . This book was released on 2014 with total page 39 pages. Available in PDF, EPUB and Kindle. Book excerpt: Firm entry dynamics are an integral part of the propagation of financial shocks to the real economy. A VAR documents that adverse financial shocks in the U.S. postwar period are associated with a fall in new firm creation and a fall in firm equity values. We propose a DSGE model with endogenous firm entry and financial frictions that is able to explain these facts. The model is novel in giving firms a choice of financing up-front entry costs through a combination of debt as well as equity, so that financial shocks directly impact the financing of firm entry. The model is also novel in making use of the asset pricing implications of the firm entry condition to explain the equity price response to a financial shock. The model indicates that free entry of new firms limits the ability of incumbent firms to respond to negative financial shocks through endogenous capital restructuring. Also, allowing the number of firms to fall after an adverse financial shock is a useful margin of macroeconomic adjustment, reducing the overall impact of the shock on aggregate output. This is because the remaining firms become financially stronger and better able to withstand a financial shock.
Author : Jose Daniel Rodríguez-Delgado
Publisher : International Monetary Fund
ISBN 13 : 1451962932
Total Pages : 32 pages
Book Rating : 4.4/5 (519 download)
Download or read book Bankruptcy and Firm Dynamics written by Jose Daniel Rodríguez-Delgado and published by International Monetary Fund. This book was released on 2010-02-01 with total page 32 pages. Available in PDF, EPUB and Kindle. Book excerpt: Financial frictions have been documented as an important determinant of firm dynamics. In this paper I model bankruptcy procedures, liquidation in particular, as an institutional feature that affects both sides of financial transactions. I construct a model of firm dynamics that generate endogenous borrowing limits and I find that a) inefficient bankruptcy procedures can have quantitatively important aggregate effects, but more importantly; b) that such effects would not be directly visible in the firms that industrial censuses and surveys focus on. I conclude that to capture the effects of the legal framework we need to look beyond the existing firms.
Author : David Laszlo Zeke
Publisher :
ISBN 13 :
Total Pages : 213 pages
Book Rating : 4.:/5 (17 download)
Download or read book Essays on Financial Frictions and Aggregate Dynamics written by David Laszlo Zeke and published by . This book was released on 2016 with total page 213 pages. Available in PDF, EPUB and Kindle. Book excerpt: This dissertation studies the effects of firm debt and financing frictions on the macroeconomy. Chapter 1 investigates the role of changes in firms' idiosyncratic risk and their cost of default in driving changes in employment and credit spreads, both over the business cycle and in the cross-section. I use firm-level panel data and a structural model of financial frictions and volatility shocks to assess the effects of shocks to firm volatility and default costs. I find that volatility shocks alone can only generate modest declines in aggregate employment. However, simultaneous shocks to firm volatility and default costs can interact to generate large employment declines. Chapter 2, co-authored with Robert Kurtzman, investigates the role of changes in the allocation of labor and capital between firms in driving productivity dynamics. This chapter presents accounting decompositions of changes in aggregate labor and capital productivity. Our simplest decomposition breaks changes in an aggregate productivity ratio into two components: A mean component, which captures common changes to firm factor productivity ratios, and a dispersion component, which captures changes in the variance and higher order moments of their distribution. We demonstrate that in standard models of production with heterogeneous firms, our dispersion component reflects changes in distortions to the allocation of labor and capital between firms. We find, for public firms in the United States and Japan, that the dispersion component plays a minor role in productivity changes over the business cycle. Chapter 3, co-authored with Robert Kurtzman, investigates the role of debt overhang, an agency problem between firms' equity holders and creditors, in distorting firm growth and aggregate welfare. This chapter addresses this question through the lens of a general equilibrium model of firm dynamics and endogenous innovation in which debt overhang affects the firm innovation decision and subsequent firm growth. The estimated model implies that while the private gains to a firm from resolving debt overhang can be large if it faces sufficient default risk, the social gains to long-run productivity and output are relatively modest. The time-varying distribution of firm default risk suggests social gains may be greater during recessions.
Author : Dongchen Zhao
Publisher :
ISBN 13 :
Total Pages : 0 pages
Book Rating : 4.:/5 (139 download)
Download or read book Essays on Firm Dynamics, Financial Frictions, and the Labor Market written by Dongchen Zhao and published by . This book was released on 2023 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: This dissertation consists of three chapters. The first chapter concerns the secular changes in the U.S. firm size distribution and firm dynamics. This chapter sets up a quantitative model of firm dynamics with debt heterogeneity to study the implications of changes in real interest rates for the firm size distribution and firm dynamics. It shows that the decline in long-term real interest rates since the early 1980s can account for a significant fraction of the shift in employment shares to large firms as well as the decline in firms per capita and firm entry rates experienced in the U.S. over the same period. In the model, firms endogenously choose financial intermediaries issuing debt with either earnings-based (EBC) or asset-based (ABC) borrowing constraints. The two types of constraints arise naturally from the imperfect enforceability of debt contracts and are in line with recent empirical findings. A decline in real interest rates benefits firms with EBC more because they are not constrained by their assets and can expand more due to increased earnings. Since firms with higher earnings optimally choose earnings-based lending, the decline in real interest rates shifts employment shares to larger firms. Moreover, the growth of large firms crowds out smaller firms and firm entry through general equilibrium effects. The paper tests the mechanism in cross-country data from the OECD and finds a stronger association between the decline in real interest rates and changes in firm dynamics, especially in countries with deeper credit markets. In the second chapter, I study the effects of government regulations on firm dynamism. The impact of government regulations on the economy is a central topic in policy debates. However, due to the endogeneity of regulations and challenges in measuring them, these debates remain contentious. This paper establishes the causal effects of government regulations on firm dynamism by employing a novel shift-share (Bartik) instrument in conjunction with the RegData dataset, which quantifies regulations based on the text of federal regulatory documents. The primary assumption for identification is that, for each sector, the exposure to regulations from different government agencies at the beginning of the period is exogenous to any confounding factors. The findings reveal that government regulatory restrictions significantly increase firm exit rates and discourage the formation of establishments, while having no substantial impact on firm entry. Furthermore, these restrictions contribute to reduced job creation, elevated job destruction, and diminished overall employment. These effects are consistently observed across various age groups. The results lend support to the idea that government regulations can raise production costs for firms and/or enhance the monopolistic power of certain companies. Both mechanisms can diminish the profits of affected firms, leading to increased firm exit rates and reduced labor demand. Additionally, the findings refute the interpretation of regulations as solely serving as entry barriers. The final chapter of the dissertation investigates the labor market outcomes for involuntary part-time workers and their subsequent effects on welfare levels. Through an analysis of survey data, I demonstrate that involuntary part-time workers exhibit reservation wages comparable to those of unemployed workers. This similarity largely stems from parallel wage offers and offer arrival rates. Contrary to previous research, this finding indicates that involuntary part-time workers experience welfare levels akin to unemployed workers. One possible explanation for this discrepancy lies in the methodology of prior studies. Conclusions drawn from earlier research, which primarily focused on the faster transition of involuntary part-time workers into full-time positions compared to other workers, may be flawed. This is because these workers also tend to revert to their previous job types at a faster rate. To further explore the implications of these discoveries, I employ a quantitative search model. The calibrated model supports the assertion that involuntary part-time workers experience welfare levels similar to those of unemployed workers. Furthermore, the model suggests that neither extending unemployment insurance to part-time workers nor enhancing the likelihood that unemployed workers transition to part-time positions would effectively increase the prevalence of full-time employment
Author : Saeed Shaker Akhtekhane
Publisher :
ISBN 13 :
Total Pages : 0 pages
Book Rating : 4.:/5 (134 download)
Download or read book Financial Frictions, Entry and Exit, and Aggregate Productivity Differences Across Countries written by Saeed Shaker Akhtekhane and published by . This book was released on 2021 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: In these essays, I study cross-country differences in productivity caused by misallocation of resources. Particularly, I examine the misallocation created by financial frictions as well as that created by entry barriers. In the first chapter, "Financial Frictions and Productivity Losses: Importance of Default-Led Heterogeneity in Collateral and Loan Rates", I develop a model of entrepreneurship with default to quantitatively analyze the impact of financial frictions on total factor productivity (TFP). Default risk justifies the need for collateral. Entrepreneurs are charged higher loan rates if the value of their collateral is low, which favors the wealthy over the poor, regardless of their talent, and discourages poor individuals from self-financing to start or expand their businesses. The close link between deposit rates and loan rates, in most models, is broken. Consistent with empirical evidence, my model can generate a weak self-financing motive while allowing for a highly persistent individual productivity, a challenge for existing models of financial frictions. Financial frictions in my model stem from three different sources: limited enforceability related to the recovery rate of collateral by financial intermediaries; informational frictions related to inefficiencies in financial intermediaries' evaluation of entrepreneurs' default risks; and frictions related to entrepreneurs' expectations of future loan terms. I use machine learning classification techniques to solve the problem financial intermediaries face evaluating entrepreneurs' default risks. My analysis shows sizeable losses from financial frictions, more than 40% in TFP losses for the U.S. if we were to replace its financial markets with a poorly functioning one. Large TFP losses arise as there is amplification between the three sources of financial friction. Without default and heterogeneity in collateral and loan rates, my model would function similarly to a neo-classical model, and there would be a small impact of financial frictions with only a 7% loss in TFP. In the second chapter, "Impact of Entry Costs on Aggregate Productivity: Financial Development Matters", I revisit the question: what is the impact of entry costs on cross-country differences in output and total factor productivity (TFP)? I argue that for the countries with low levels of financial development, the answer is the conventional one in the literature, that higher entry costs cause misallocation of productive factors and lower TFP. However, for countries with reasonably high levels of financial development, the conventional answer does not hold. Motivated by observations on cross-country data, I propose a new theory on the impact of entry costs on TFP. In my mechanism, two competing forces affect TFP when entry cost changes: A wealth-based selection force and a productivity-based selection force. This results in TFP being a hump-shaped function of entry costs. That is, entry costs are not inherently bad for TFP if their target is to deter low productivity individuals from starting businesses. I develop an analytically tractable model of firm dynamics with entry barriers and financial frictions and derive the sufficient conditions for the impact of entry cost on TFP in both wealth- and productivity-based selection phases. In the third chapter, "Firm Entry and Exit in Continuous Time", I develop and analyze a model of firms' entry and exit in a continuous-time setting. I build my analysis based on Hopenhayn (1992) firm dynamics framework and use the continuous-time structure to solve the model. Solving the model in continuous time brings in many advantages, such as lower computational cost and the model's tractability. However, there are some challenges too. One of the major challenges is to have entry cost in the model, i.e., to obtain a Hamilton-Jacobi-Bellman equation that incorporates the entry cost. I use a form of exit cost as the future value of the entry cost to avoid this problem. To do so, I have to keep track of the firms' age distribution in addition to the distribution of the shocks, which makes my model richer than Hopenhayn's (1992). To solve for the joint stationary distribution of the firms, I introduce a simple process for aging and obtain the Kolmogorov forward equation using the age and shock processes. Another methodological contribution is to introduce a way to deal with the Kolmogorov equation in two states with discontinuity and combine them into one equation that governs the state of the economy. The results obtained in this chapter are in line with those reported in Hopenhayn (1992). However, the methods, tools, and the way of approaching the model differs depending on whether I solve the model in discrete or continuous time. The tools and procedures developed in this chapter can easily be extended to other optimal stopping time problems.
Author : Ambrogio Cesa-Bianchi
Publisher : International Monetary Fund
ISBN 13 : 1484320727
Total Pages : 45 pages
Book Rating : 4.4/5 (843 download)
Download or read book Uncertainty, Financial Frictions and Nominal Rigidities: A Quantitative Investigation written by Ambrogio Cesa-Bianchi and published by International Monetary Fund. This book was released on 2017-09-29 with total page 45 pages. Available in PDF, EPUB and Kindle. Book excerpt: Are uncertainty shocks a major source of business cycle fluctuations? This paper studies the effect of a mean preserving shock to the variance of aggregate total factor productivity (macro uncertainty) and to the dispersion of entrepreneurs' idiosyncratic productivity (micro uncertainty) in a financial accelerator DSGE model with sticky prices. It explores the different mechanisms through which uncertainty shocks are propagated and amplified. The time series properties of macro and micro uncertainty are estimated using U.S. aggregate and firm-level data, respectively. While surprise increases in micro uncertainty have a larger impact on output than macro uncertainty, these account for a small (non-trivial) share of output volatility.
Author : Mr.Stijn Claessens
Publisher : International Monetary Fund
ISBN 13 : 1455209317
Total Pages : 47 pages
Book Rating : 4.4/5 (552 download)
Download or read book Financial Frictions, Investment, and Institutions written by Mr.Stijn Claessens and published by International Monetary Fund. This book was released on 2010-10-01 with total page 47 pages. Available in PDF, EPUB and Kindle. Book excerpt: Financial frictions have been identified as key factors affecting economic fluctuations and growth. But, can institutional reforms reduce financial frictions? Based on a canonical investment model, we consider two potential channels: (i) financial transaction costs at the firm level; and (ii) required return at the country level. We empirically investigate the effects of institutions on these financial frictions using a panel of 75,000 firm-years across 48 countries for the period 1990 - 2007. We find that improved corporate governance (e.g., less informational problems) and enhanced contractual enforcement reduce financial frictions, while stronger creditor rights (e.g., lower collateral constraints) are less important.
Author : William Gbohoui
Publisher : International Monetary Fund
ISBN 13 : 149830088X
Total Pages : 39 pages
Book Rating : 4.4/5 (983 download)
Download or read book Financial Frictions and Stimulative Effects of Temporary Corporate Tax Cuts written by William Gbohoui and published by International Monetary Fund. This book was released on 2019-05-07 with total page 39 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper uses an industry equilibrium model where some firms are financially constrained to quantify the effects of a transitory corporate tax cut funded by a future tax increase on the U.S. economy. It finds that by increasing current cash-flows tax cuts alleviate financing frictions, hereby stimulating current investment. Per dollar of tax stimulus, aggregate investment increases by 26 cents on impact, and aggregate output by 3.5 cents. The average effect masks heterogeneity: multipliers are close to 1 for constrained firms, especially new entrants, and negative for larger and unconstrained firms. The output effects extend well past the period the policy is reversed, leading to a cumulative multiplier of 7.2 cents. Multipliers are significantly larger when controlling for the investment crowding-out effect among unconstrained firms.
Author : Marzie Taheri Sanjani
Publisher : International Monetary Fund
ISBN 13 : 1498347797
Total Pages : 33 pages
Book Rating : 4.4/5 (983 download)
Download or read book Financial Frictions and Sources of Business Cycle written by Marzie Taheri Sanjani and published by International Monetary Fund. This book was released on 2014-10-23 with total page 33 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper estimates a New Keynesian DSGE model with an explicit financial intermediary sector. Having measures of financial stress, such as the spread between lending and borrowing, enables the model to capture the impact of the financial crisis in a more direct and efficient way. The model fits US post-war macroeconomic data well, and shows that financial shocks play a greater role in explaining the volatility of macroeconomic variables than marginal efficiency of investment (MEI) shocks.
Author : Mr.Romain A Duval
Publisher : International Monetary Fund
ISBN 13 : 148430070X
Total Pages : 32 pages
Book Rating : 4.4/5 (843 download)
Download or read book Financial Frictions and the Great Productivity Slowdown written by Mr.Romain A Duval and published by International Monetary Fund. This book was released on 2017-05-31 with total page 32 pages. Available in PDF, EPUB and Kindle. Book excerpt: We study the role of financial frictions in explaining the sharp and persistent productivity growth slowdown in advanced economies after the 2008 global financial crisis. Using a rich cross-country, firm-level data set and exploiting quasi-experimental variation in firm-level exposure to the crisis, we find that the combination of pre-existing firm-level financial fragilities and tightening credit conditions made an important contribution to the post-crisis productivity slowdown. Specifically: (i) firms that entered the crisis with weaker balance sheets experienced decline in total factor productivity growth relative to their less vulnerable counterparts after the crisis; (ii) this decline was larger for firms located in countries where credit conditions tightened more; (iii) financially fragile firms cut back on intangible capital investment compared to more resilient firms, which is one plausible way through which financial frictions undermined productivity. All of these effects are highly persistent and quantitatively large—possibly accounting on average for about a third of the post-crisis slowdown in within-firm total factor productivity growth. Furthermore, our results are not driven by more vulnerable firms being less productive or having experienced slower productivity growth before the crisis, or differing from less vulnerable firms along other dimensions.
Author : Francesco Manaresi
Publisher : International Monetary Fund
ISBN 13 : 1498315917
Total Pages : 75 pages
Book Rating : 4.4/5 (983 download)
Download or read book Credit Supply and Productivity Growth written by Francesco Manaresi and published by International Monetary Fund. This book was released on 2019-05-17 with total page 75 pages. Available in PDF, EPUB and Kindle. Book excerpt: We study the impact of bank credit on firm productivity. We exploit a matched firm-bank database covering all the credit relationships of Italian corporations, together with a natural experiment, to measure idiosyncratic supply-side shocks to credit availability and to estimate a production model augmented with financial frictions. We find that a contraction in credit supply causes a reduction of firm TFP growth and also harms IT-adoption, innovation, exporting, and adoption of superior management practices, while a credit expansion has limited impact. Quantitatively, the credit contraction between 2007 and 2009 accounts for about a quarter of observed the decline in TFP.
Author : Esteban Rossi-Hansberg
Publisher :
ISBN 13 :
Total Pages : 44 pages
Book Rating : 4.:/5 (255 download)
Download or read book Firm Size Dynamics in the Aggregate Economy written by Esteban Rossi-Hansberg and published by . This book was released on 2005 with total page 44 pages. Available in PDF, EPUB and Kindle. Book excerpt: Why do firm growth and exit rates decline with size? What determines the size distribution of firms? This paper presents a theory of firm dynamics that simultaneously rationalizes the basic facts on firm growth, exit, and size distributions. The theory emphasizes the accumulation of industry specific human capital in response to industry specific productivity shocks. The theory implies that firm growth and exit rates should decline faster with size, and the size distribution should have thinner tails, in sectors that use human capital less intensively, or correspondingly, physical capital more intensively. In line with the theory, we document substantial sectoral heterogeneity in US firm dynamics and firm size distributions, which is well explained by variation in physical capital intensities.
Author : N. Gregory Mankiw
Publisher : Macmillan
ISBN 13 : 1429253673
Total Pages : 642 pages
Book Rating : 4.4/5 (292 download)
Download or read book Macroeconomics and the Financial System written by N. Gregory Mankiw and published by Macmillan. This book was released on 2011 with total page 642 pages. Available in PDF, EPUB and Kindle. Book excerpt: Watch this video interview with Greg Mankiw and Larry Ball discussing the future of the intermediate macroeconomics course and their new text. Check out preview content for Macroeconomics and the Financial System here. The financial crisis and subsequent economic downturn of 2008 and 2009 was a dramatic reminder of what economists have long understood: developments in the overall economy and developments in the financial system are inextricably intertwined. Derived and updated from two widely acclaimed textbooks (Greg Mankiw’s Macroeconomics, Seventh Edition and Larry Ball’s Money, Banking, and the Financial System), this groundbreaking text is the first and only intermediate macroeconomics text that provides substantial coverage of the financial system.
Author : Guido Lorenzoni
Publisher :
ISBN 13 :
Total Pages : 48 pages
Book Rating : 4.3/5 ( download)
Download or read book Financial Frictions, Investment and Tobin's Q written by Guido Lorenzoni and published by . This book was released on 2007 with total page 48 pages. Available in PDF, EPUB and Kindle. Book excerpt: We develop a model of investment with financial constraints and use it to investigate the relation between investment and Tobin's q. A firm is financed partly by insiders, who control its assets, and partly by outside investors. When their wealth is scarce, insiders earn a rate of return higher than the market rate of return, i.e., they receive a quasi-rent on invested capital. This rent is priced into the value of the firm, so Tobin's q is driven by two forces: changes in the value of invested capital, and changes in the value of the insiders' future rents per unit of capital. This weakens the correlation between q and investment, relative to the frictionless benchmark. We present a calibrated version of the model, which, due to this effect, generate realistic correlations between investment, q, and cash flow. Keywords: Financial constraints, investment, Tobin's q, limited enforcement. JEL Classifications: E22, E30, E44, G30.
Author : Paul R. Bergin
Publisher :
ISBN 13 :
Total Pages : pages
Book Rating : 4.:/5 (894 download)
Download or read book Financial Frictions and Firm Dynamcis written by Paul R. Bergin and published by . This book was released on 2014 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:
