Corporate Debt Structure and the Financial Crisis
AbstractWe 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 InfoPaper provided by Society for Economic Dynamics in its series 2012 Meeting Papers with number 429.
Date of creation: 2012
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