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Corporate Debt Structure and the Financial Crisis

  • Harald Uhlig

    (University of Chicago)

  • Fiorella De Fiore

    (European Central Bank)

We present a DSGE model where firms optimally choose among alternative instruments of external finance. The model is used to explain the evolving composition of corporate debt during the financial crisis of 2007-09, namely the observed shift from bank finance to bond finance despite the increasing cost of debt securities relative to bank loans. We show that substitutability among instruments of external finance is important to shield the economy from the adverse effects of a financial crisis on investment and output

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Paper provided by Society for Economic Dynamics in its series 2012 Meeting Papers with number 429.

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Date of creation: 2012
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Handle: RePEc:red:sed012:429
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  1. Nicholas Bloom, 2007. "The Impact of Uncertainty Shocks," NBER Working Papers 13385, National Bureau of Economic Research, Inc.
  2. Denis, David J. & Mihov, Vassil T., 2003. "The choice among bank debt, non-bank private debt, and public debt: evidence from new corporate borrowings," Journal of Financial Economics, Elsevier, vol. 70(1), pages 3-28, October.
  3. Tobias Adrian & Paolo Colla & Hyun Song Shin, 2012. "Which Financial Frictions? Parsing the Evidence from the Financial Crisis of 2007-9," NBER Working Papers 18335, National Bureau of Economic Research, Inc.
  4. Chemmanur, T.J. & Fulghieri, P., 1992. "Reputation, Renegotiation, and the Choice Between Bank Loans and Publicity Traded Debt," Papers 92-24, Columbia - Graduate School of Business.
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  7. Bundick, Brent & Basu, Susanto, 2014. "Uncertainty shocks in a model of effective demand," Research Working Paper RWP 14-15, Federal Reserve Bank of Kansas City.
  8. Roberto Motto & Massimo Rostagno & Lawrence J. Christiano, 2010. "Financial Factors in Economic Fluctuations," 2010 Meeting Papers 141, Society for Economic Dynamics.
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  12. William B. Peterman, 2012. "Reconciling micro and macro estimates of the Frisch labor supply elasticity," Finance and Economics Discussion Series 2012-75, Board of Governors of the Federal Reserve System (U.S.).
  13. Bengt Holmstrom & Jean Tirole, 1994. "Financial Intermediation, Loanable Funds and the Real Sector," Working papers 95-1, Massachusetts Institute of Technology (MIT), Department of Economics.
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  15. Bo Becker & Victoria Ivashina, 2011. "Cyclicality of Credit Supply: Firm Level Evidence," NBER Working Papers 17392, National Bureau of Economic Research, Inc.
  16. Fiorella Del Fiore & Harald Uhlig, 2011. "Bank Finance Versus Bond Finance," Working Papers 2011-004, Becker Friedman Institute for Research In Economics.
  17. Robert Townsend, 1979. "Optimal contracts and competitive markets with costly state verification," Staff Report 45, Federal Reserve Bank of Minneapolis.
  18. Tobias Adrian & Paolo Colla & Hyun Song Shin, 2012. "Which Financial Frictions? Parsing the Evidence from the Financial Crisis of 2007 to 2009," NBER Chapters, in: NBER Macroeconomics Annual 2012, Volume 27, pages 159-214 National Bureau of Economic Research, Inc.
  19. Gertler, Mark & Karadi, Peter, 2011. "A model of unconventional monetary policy," Journal of Monetary Economics, Elsevier, vol. 58(1), pages 17-34, January.
  20. Paolo Colla & Filippo Ippolito & Kai Li, 2013. "Debt Specialization," Journal of Finance, American Finance Association, vol. 68(5), pages 2117-2141, October.
  21. Lawrence J. Christiano & Roberto Motto & Massimo Rostagno, 2014. "Risk Shocks," American Economic Review, American Economic Association, vol. 104(1), pages 27-65, January.
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