Advanced Search
MyIDEAS: Login to save this paper or follow this series

Financial frictions, capital reallocation, and aggregate fluctuations

Contents:

Author Info

  • von Hagen, Jürgen
  • Zhang, Haiping

Abstract

We address an important business cycle fact, i.e., the amplified and hump-shaped responses of output to productivity shocks, in a dynamic general equilibrium model with financial frictions. Models with financial frictions in the current literature have either the amplification mechanism or the propagation mechanism. Our model shows that the dynamic interaction of borrowing constraints, endogenous capital accumulation and capital reallocation among agents with different productivity constitutes a mechanism through which the effects of productivity shock on aggregate output are amplified and propagated, more in line with the empirical evidence than other related models in the literature. --

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://econstor.eu/bitstream/10419/39643/1/527776297.pdf
Download Restriction: no

Bibliographic Info

Paper provided by ZEI - Center for European Integration Studies, University of Bonn in its series ZEI Working Papers with number B 03-2006.

as in new window
Length:
Date of creation: 2006
Date of revision:
Handle: RePEc:zbw:zeiwps:b032006

Contact details of provider:
Postal: Walter-Flex-Straße 3, D - 53113 Bonn
Web page: http://www.zei.de/index_e.html
More information through EDIRC

Related research

Keywords: Amplification; Business cycles; Capital reallocation; Financial frictions; Propagation;

Other versions of this item:

Find related papers by JEL classification:

References

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
as in new window
  1. Kato, Ryo, 2006. "Liquidity, infinite horizons and macroeconomic fluctuations," European Economic Review, Elsevier, Elsevier, vol. 50(5), pages 1105-1130, July.
  2. Schmitt-Grohé, Stephanie & Uribe, Martín, 2001. "Solving Dynamic General Equilibrium Models Using a Second-Order Approximation to the Policy Function," CEPR Discussion Papers, C.E.P.R. Discussion Papers 2963, C.E.P.R. Discussion Papers.
  3. Bengt Holmstrom & Jean Tirole, 1994. "Financial Intermediation, Loanable Funds and the Real Sector," Working papers, Massachusetts Institute of Technology (MIT), Department of Economics 95-1, Massachusetts Institute of Technology (MIT), Department of Economics.
  4. Charles T. Carlstrom & Timothy S. Fuerst, 1996. "Agency costs, net worth, and business fluctuations: a computable general equilibrium analysis," Working Paper 9602, Federal Reserve Bank of Cleveland.
  5. Bernanke, B. & Gertler, M. & Gilchrist, S., 1998. "The Financial Accelerator in a Quantitative Business Cycle Framework," Working Papers, C.V. Starr Center for Applied Economics, New York University 98-03, C.V. Starr Center for Applied Economics, New York University.
  6. Jones, C.I., 2000. "Sources of U.S. Economic Growth in a World of Ideas," Papers, United Nations World Employment Programme- 99-29, United Nations World Employment Programme-.
  7. 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.
  8. Timothy S. Fuerst & Charles T. Carlstrom, 1998. "Agency costs and business cycles," Economic Theory, Springer, Springer, vol. 12(3), pages 583-597.
  9. Jürgen von Hagen & Haiping Zhang, 2006. "Financial Liberalization in a Small Open Economy," CESifo Working Paper Series 1771, CESifo Group Munich.
  10. Andolfatto, David, 1996. "Business Cycles and Labor-Market Search," American Economic Review, American Economic Association, American Economic Association, vol. 86(1), pages 112-32, March.
  11. Timothy Cogley & James M. Nason, 1993. "Output dynamics in real business cycle models," Working Papers in Applied Economic Theory, Federal Reserve Bank of San Francisco 93-10, Federal Reserve Bank of San Francisco.
  12. Nobuhiro Kiyotaki & John Moore, 1995. "Credit Cycles," NBER Working Papers 5083, National Bureau of Economic Research, Inc.
  13. Cogley, Timothy & Nason, James M., 1993. "Impulse dynamics and propagation mechanisms in a real business cycle model," Economics Letters, Elsevier, Elsevier, vol. 43(1), pages 77-81.
  14. Chen, Nan-Kuang, 2001. "Bank net worth, asset prices and economic activity," Journal of Monetary Economics, Elsevier, Elsevier, vol. 48(2), pages 415-436, October.
  15. Hart, Oliver, 1995. "Firms, Contracts, and Financial Structure," OUP Catalogue, Oxford University Press, Oxford University Press, number 9780198288817, October.
Full references (including those not matched with items on IDEAS)

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
  1. Cakici, S. Meral, 2011. "Financial integration and business cycles in a small open economy," Journal of International Money and Finance, Elsevier, Elsevier, vol. 30(7), pages 1280-1302.
  2. Cakici, S. Meral, 2012. "Technology shocks under varying degrees of financial openness," International Review of Economics & Finance, Elsevier, Elsevier, vol. 21(1), pages 232-245.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:zbw:zeiwps:b032006. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (ZBW - German National Library of Economics).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.