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When do credit frictions matter for business cycles?

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  • Felipe Schwartzman

Abstract

Since the Great Recession there has been renewed interest in introducing credit frictions in business cycle models. However, in order for credit frictions to be quantitatively meaningful and qualitatively realistic in business cycles, it is necessary to depart from conventional assumptions about production technology or preferences and/or add additional frictions. This article reviews some of those departures and additions.

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  • Felipe Schwartzman, 2012. "When do credit frictions matter for business cycles?," Economic Quarterly, Federal Reserve Bank of Richmond, issue 3Q, pages 209-230.
  • Handle: RePEc:fip:fedreq:y:2012:i:3q:p:209-230:n:v.98no.3
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    References listed on IDEAS

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    1. Fabrizio Perri & Vincenzo Quadrini, 2018. "International Recessions," American Economic Review, American Economic Association, vol. 108(4-5), pages 935-984, April.
    2. Veronica Guerrieri & Guido Lorenzoni, 2017. "Credit Crises, Precautionary Savings, and the Liquidity Trap," The Quarterly Journal of Economics, Oxford University Press, vol. 132(3), pages 1427-1467.
    3. Mark Gertler & Simon Gilchrist & Fabio M. Natalucci, 2007. "External Constraints on Monetary Policy and the Financial Accelerator," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 39(2-3), pages 295-330, March.
    4. Jae Sim & Egon Zakrajsek & Simon Gilchrist, 2010. "Uncertainty, Financial Frictions, and Investment Dynamics," 2010 Meeting Papers 1285, Society for Economic Dynamics.
    5. Schwartzman, Felipe, 2014. "Time to produce and emerging market crises," Journal of Monetary Economics, Elsevier, vol. 68(C), pages 37-52.
    6. Markus K. Brunnermeier & Thomas M. Eisenbach & Yuliy Sannikov, 2012. "Macroeconomics with Financial Frictions: A Survey," Levine's Working Paper Archive 786969000000000384, David K. Levine.
    7. Nobuhiro Kiyotaki & Gauti Eggertsson & Andrea Ferrero & Marco Del Negro, 2010. "The Great Escape? A Quantitative Evaluation of the Fed’s Non-Standard Policies," 2010 Meeting Papers 113, Society for Economic Dynamics.
    8. Coen-Pirani, Daniele, 2005. "Margin requirements and equilibrium asset prices," Journal of Monetary Economics, Elsevier, vol. 52(2), pages 449-475, March.
    9. Deaton, Angus, 1992. "Understanding Consumption," OUP Catalogue, Oxford University Press, number 9780198288244.
    10. Francisco J. Buera & Benjamin Moll, 2012. "Aggregate Implications of a Credit Crunch," NBER Working Papers 17775, National Bureau of Economic Research, Inc.
    11. Fuerst, Timothy S., 1992. "Liquidity, loanable funds, and real activity," Journal of Monetary Economics, Elsevier, vol. 29(1), pages 3-24, February.
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    Cited by:

    1. Eric Leeper & James Nason, 2014. "Bringing Financial Stability into Monetary Policy," Caepr Working Papers 2014-003, Center for Applied Economics and Policy Research, Economics Department, Indiana University Bloomington.
    2. Pablo Ottonello, 2015. "Capital Unemployment, Financial Shocks, and Investment Slumps," 2015 Meeting Papers 1153, Society for Economic Dynamics.

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