Please use this identifier to cite or link to this item:
http://hdl.handle.net/2445/122329
Title: | Financial development, credit, and business cycles |
Author: | Pinheiro, Tiago Rivadeneyra, Francisco Teignier, Marc |
Keywords: | Gestió financera Desenvolupament econòmic Cicles econòmics Financial management Economic development Business cycles |
Issue Date: | Sep-2017 |
Publisher: | Wiley |
Abstract: | How does financial development affect the magnitude of the business cycles fluctuations? We examine this question in a general equilibrium model with heterogeneous agents and endogenous credit constraints based on Kiyotaki (1998). We show that there is a hump‐shaped relationship between the degree of financial frictions and the amplification of unexpected productivity shocks. This nonmonotonic relation is due to the fall in financial frictions having two opposite effects on the response of output. One effect is the reallocation of productive inputs between agent types, which, while active, increases with the fall in financial frictions. The other effect is the change in the demand of inputs, which decreases with the fall in financial frictions. At low levels of financial development, the reallocation effect dominates and a fall in financial frictions increases the amplification of productivity shocks. In contrast, at higher levels of financial development, a fall in financial frictions decreases the shock amplification because the reallocation effect disappears while the effect on the demand of inputs is still present. |
Note: | Versió postprint del document publicat a: https://doi.org/10.1111/jmcb.12427 |
It is part of: | Journal of Money, Credit and Banking, 2017, vol. 49, num. 7, p. 1653-1665 |
URI: | http://hdl.handle.net/2445/122329 |
Related resource: | https://doi.org/10.1111/jmcb.12427 |
ISSN: | 0022-2879 |
Appears in Collections: | Articles publicats en revistes (Economia) |
Files in This Item:
File | Description | Size | Format | |
---|---|---|---|---|
669134.pdf | 489.88 kB | Adobe PDF | View/Open |
Items in DSpace are protected by copyright, with all rights reserved, unless otherwise indicated.