Macroeconomic Effects of Financial Shocks

We document the cyclical properties of US firms' financial flows and show that equity payout is procyclical and debt payout is countercyclical. We then develop a model with debt and equity financing to explore how the dynamics of real and financial variables are affected by "financial shoc...

Full description

Saved in:
Bibliographic Details
Published in:The American economic review 2012-02, Vol.102 (1), p.238-271
Main Authors: Jermann, Urban, Quadrini, Vincenzo
Format: Article
Language:English
Subjects:
Business cycles
Credit market
Debt
Debt to equity ratio
Economic fluctuations
Economic impact
Economic models
Economic recessions
Economic shock
Economic theory
Enforcement
Enterprises
Equity
Finance
Financial crisis
Financial services
Financing methods
GDP
Gross Domestic Product
Macroeconomic modeling
Macroeconomics
Productivity
Public debt
Recessions
Stockholders
Studies
U.S.A
Variables
Citations: Items that this one cites
Items that cite this one
Online Access:Get full text
Tags: Add Tag
No Tags, Be the first to tag this record!
Description
Summary:We document the cyclical properties of US firms' financial flows and show that equity payout is procyclical and debt payout is countercyclical. We then develop a model with debt and equity financing to explore how the dynamics of real and financial variables are affected by "financial shocks." We find that financial shocks contributed significantly to the observed dynamics of real and financial variables. The recent events in the financial sector show up as a tightening of firms' financing conditions which contributed to the 2008-2009 recession. The downturns in 1990-1991 and 2001 were also influenced by changes in credit conditions.
ISSN:0002-8282
1944-7981
DOI:10.1257/aer.102.1.238