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Organizational Dynamics and Aggregate Fluctuations: The Role of Financial Relationships

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  • Keisuke Otsu

    ()

  • Masashi Saito

Abstract

This paper constructs a dynamic stochastic general equilibrium model in which labor reallocations between production and organizational tasks generate endogenous TFP movements and also amplify and propagate the effects of exogenous shocks on macroeconomic activity. Organizational tasks in our model enhances financial relationships between firms and lenders, which lowers the credit spread. We calibrate and estimate the model using Japanese data and conduct a quantitative analysis. Our results suggest that the labor reallocation channel considered in this paper contributes greatly to the observed movements in the measured TFP, and serves as a quantitatively important amplification and propagation mechanism in aggregate fluctuations.

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File URL: ftp://ftp.ukc.ac.uk/pub/ejr/RePEc/ukc/ukcedp/1102.pdf
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Bibliographic Info

Paper provided by Department of Economics, University of Kent in its series Studies in Economics with number 1102.

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Date of creation: Feb 2011
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Handle: RePEc:ukc:ukcedp:1102

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Postal: Department of Economics, University of Kent at Canterbury, Canterbury, Kent, CT2 7NP
Phone: +44 (0)1227 764000
Fax: +44 (0)1227 827850
Web page: http://www.ukc.ac.uk/economics/

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Keywords: Labor Reallocations; Financial Relationship; Organizational Capital; TFP; Aggregate Fluctuations;

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  14. Gilchrist, Simon & Yankov, Vladimir & Zakrajsek, Egon, 2009. "Credit market shocks and economic fluctuations: Evidence from corporate bond and stock markets," Journal of Monetary Economics, Elsevier, vol. 56(4), pages 471-493, May.
  15. Eisfeldt, Andrea L. & Rampini, Adriano A., 2006. "Capital reallocation and liquidity," Journal of Monetary Economics, Elsevier, vol. 53(3), pages 369-399, April.
  16. Lee E. Ohanian, 2001. "Why did productivity fall so much during the Great Depression?," Staff Report 285, Federal Reserve Bank of Minneapolis.
  17. Fumio Hayashi & Edward C. Prescott, 2002. "The 1990s in Japan: A Lost Decade," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 5(1), pages 206-235, January.
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  20. Ricardo J. Caballero & Takeo Hoshi & Anil K. Kashyap, 2006. "Zombie Lending and Depressed Restructuring in Japan," NBER Working Papers 12129, National Bureau of Economic Research, Inc.
  21. Lawrence J. Christiano & Martin Eichenbaum, 1992. "Liquidity effects, the monetary transmission mechanism, and monetary policy," Economic Perspectives, Federal Reserve Bank of Chicago, issue Nov, pages 2-14.
  22. Berger, Allen N & Udell, Gregory F, 1995. "Relationship Lending and Lines of Credit in Small Firm Finance," The Journal of Business, University of Chicago Press, vol. 68(3), pages 351-81, July.
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