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Corporate Debt Structure and the Financial Crisis

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  • Harald Uhlig

    (University of Chicago)

  • Fiorella De Fiore

    (European Central Bank)

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 2007-09, namely the observed shift from bank finance to bond finance despite the increasing cost of debt securities relative to bank loans. We show that substitutability among instruments of external finance is important to shield the economy from the adverse effects of a financial crisis on investment and output

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Bibliographic Info

Paper provided by Society for Economic Dynamics in its series 2012 Meeting Papers with number 429.

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Date of creation: 2012
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Handle: RePEc:red:sed012:429

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  1. Holmström, Bengt & Tirole, Jean, 1994. "Financial Intermediation, Loanable Funds and the Real Sector," IDEI Working Papers 40, Institut d'Économie Industrielle (IDEI), Toulouse.
  2. Repullo, Rafael & Suarez, Javier, 2000. "Entrepreneurial moral hazard and bank monitoring: A model of the credit channel," European Economic Review, Elsevier, vol. 44(10), pages 1931-1950, December.
  3. John Van Reenen & Nick Bloom & Steve Bond, 2006. "Uncertainty and investment dynamics," LSE Research Online Documents on Economics 2645, London School of Economics and Political Science, LSE Library.
  4. Nicholas Bloom, 2007. "The Impact of Uncertainty Shocks," NBER Working Papers 13385, National Bureau of Economic Research, Inc.
  5. Fiorella De Fiore & Harald Uhlig, 2011. "Bank Finance Versus Bond Finance," NBER Working Papers 16979, National Bureau of Economic Research, Inc.
  6. Roberto Motto & Massimo Rostagno & Lawrence J. Christiano, 2010. "Financial Factors in Economic Fluctuations," 2010 Meeting Papers 141, Society for Economic Dynamics.
  7. Chemmanur, T.J. & Fulghieri, P., 1992. "Reputation, Renegotiation, and the Choice Between Bank Loans and Publicity Traded Debt," Papers 92-24, Columbia - Graduate School of Business.
  8. Boot, Arnoud W A & Greenbaum, Stuart I & Thakor, Anjan V, 1993. "Reputation and Discretion in Financial Contracting," American Economic Review, American Economic Association, vol. 83(5), pages 1165-83, December.
  9. Bo Becker & Victoria Ivashina, 2011. "Cyclicality of Credit Supply: Firm Level Evidence," NBER Working Papers 17392, National Bureau of Economic Research, Inc.
  10. Gertler, Mark & Karadi, Peter, 2011. "A model of unconventional monetary policy," Journal of Monetary Economics, Elsevier, vol. 58(1), pages 17-34, January.
  11. Tobias Adrian & Paolo Colla & Hyun Song Shin, 2011. "Which financial frictions? Parsing the evidence from the financial crisis of 2007-09," Staff Reports 528, Federal Reserve Bank of New York.
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Cited by:
  1. Stepanchuk Serhiy & Ádám Reiff, 2012. "11th Annual Macroeconomic Policy Research Workshop at MNB: Microeconomic Behavior and its Macroeconomic Implications During the Financial Crisis," MNB Bulletin, Magyar Nemzeti Bank (the central bank of Hungary), vol. 7(3), pages 67-72, October.
  2. Tobias Adrian & Paolo Colla & Hyun Song Shin, 2013. "Which Financial Frictions? Parsing the Evidence from the Financial Crisis of 2007 to 2009," NBER Macroeconomics Annual, University of Chicago Press, vol. 27(1), pages 159 - 214.
  3. Boissay, Frederic & Collard, Fabrice & Smets, Frank, 2013. "Booms and systemic banking crises," Working Paper Series 1514, European Central Bank.
  4. Silvio Contessi & Li Li & Katheryn Russ, 2013. "Bank vs. bond financing over the business cycle," Economic Synopses, Federal Reserve Bank of St. Louis.

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