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Credit Crunches and Credit Allocation in a Model of Entrepreneurship

  • Mariacristina De Nardi

    (Federal Reserve Bank of Chicago)

  • Marco Cagetti

    (Board of Governors of the Federal Reserve System)

  • Marco Bassetto

    (Federal Reserve Bank of Chicago)

We study the effects of credit shocks in a model with heterogeneous entrepreneurs, financing constraints, and a realistic firm size distribution. As entrepreneurial firms can grow only slowly in this set-up, we show that, by reducing entrepreneurial firm size, negative shocks have a very persistent effect on real activity.

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Paper provided by Society for Economic Dynamics in its series 2011 Meeting Papers with number 262.

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Date of creation: 2011
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Handle: RePEc:red:sed011:262
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Society for Economic Dynamics Marina Azzimonti Department of Economics Stonybrook University 10 Nicolls Road Stonybrook NY 11790 USA

Web page: http://www.EconomicDynamics.org/
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