Credit market imperfections and the heterogeneous response of firms to monetary shocks
AbstractThis paper assesses the bank-lending channel interpretation of evidence on the heterogeneous response of firms to monetary shocks. To do so I develop a quantitative general equilibrium model of the bank-lending channel with imperfect credit markets. The calibrated model's steady state supports a common identification strategy adopted in the literature: small firms are credit constrained and large firms are not. For some parameter values the model reproduces the cyclical observations viewed as supporting the lending view of the monetary transmission mechanism and for others it does not. The parameter values consistent with the lending view appear to be implausible.
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Bibliographic InfoPaper provided by Federal Reserve Bank of Chicago in its series Working Paper Series, Macroeconomic Issues with number 96-23.
Date of creation: 1998
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Other versions of this item:
- Fisher, Jonas D M, 1999. "Credit Market Imperfections and the Heterogeneous Response of Firms to Monetary Shocks," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 31(2), pages 187-211, May.
- NEP-ALL-2001-05-02 (All new papers)
- NEP-DGE-2001-05-02 (Dynamic General Equilibrium)
- NEP-FMK-2001-05-02 (Financial Markets)
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