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Firm volatility and credit: a macroeconomic analysis

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  • Leo Kaas

Abstract

This paper examines a tractable real business cycle model with idiosyncratic productivity shocks and binding credit constraints on entrepreneurs. The model shows how firm volatility increases in combination with credit market development. It further generates the observed comovement of credit and firm volatility with output at business cycle frequencies in response to aggregate productivity shocks.

Suggested Citation

  • Leo Kaas, 2009. "Firm volatility and credit: a macroeconomic analysis," Review, Federal Reserve Bank of St. Louis, issue Mar, pages 95-106.
  • Handle: RePEc:fip:fedlrv:y:2009:i:mar:p:95-106:n:v.91no.2
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    Cited by:

    1. Pengfei Wang & Yi Wen, 2009. "Financial development and economic volatility: a unified explanation," Working Papers 2009-022, Federal Reserve Bank of St. Louis.
    2. Myftari, Entela & Rossi, Sergio, 2010. "Prix des actifs et politique monétaire : enjeux et perspectives après la crise financière de 2007-2009," L'Actualité Economique, Société Canadienne de Science Economique, vol. 86(3), pages 355-383, septembre.
    3. Shalini Mitra, 2012. "Does Financial Development Cause Higher Firm Volatility and Lower Aggregate Volatility?," Working papers 2012-07, University of Connecticut, Department of Economics.
    4. Hirano, Tomohiro & Yanagawa, Noriyuki, 2010. "Asset Bubbles, Endogenous Growth, and Financial Frictions," MPRA Paper 24085, University Library of Munich, Germany.
    5. Petra Marotzke, 2011. "Macroeconomic Stability and Wage Inequality: A Model with Credit and Labor Market Frictions," Working Paper Series of the Department of Economics, University of Konstanz 2011-38, Department of Economics, University of Konstanz.

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    Keywords

    Business cycles;

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