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Corporate Debt Structure and the Financial Crisis

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  • De Fiore, Fiorella
  • Uhlig, Harald

Abstract

We present a DSGE model where firms optimally choose among alternative instruments of external finance. The model is used to explain the evolving composition of corporate debt during the financial crisis of 2008-09, namely the observed shift from bank finance to bond finance, at a time when the cost of market debt rose above the cost of bank loans. We show that the flexibility offered by banks on the terms of their loans and firms JEL Classification: E32, E44, C68, G23

Suggested Citation

  • De Fiore, Fiorella & Uhlig, Harald, 2015. "Corporate Debt Structure and the Financial Crisis," Working Paper Series 1759, European Central Bank.
    • Handle: RePEc:ecb:ecbwps:20151759
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    References listed on IDEAS

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    More about this item

    Keywords

    corporate debt; financial crisis; firms heterogeneity; risk shocks;
    All these keywords.

    JEL classification:

    • E22 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Investment; Capital; Intangible Capital; Capacity
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • E5 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit

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