Macroeconomic Effects of Financial Shocks

Urban Jermann and Vincenzo Quadrini

No 15338, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: In this paper we document the cyclical properties of U.S. firms' financial flows. Equity payouts are procyclical and debt payouts are countercyclical. We develop a model with explicit roles for debt and equity financing and explore how the observed dynamics of real and financial variables are affected by `financial shocks', that is, shocks that affect the firms' capacity to borrow. Standard productivity shocks can only partially explain the movements in real and financial variables. The addition of financial shocks brings the model much closer to the data. The recent events in the financial sector show up clearly in our model as a tightening of firms' financing conditions causing the GDP decline in 2008-09. Our analysis also suggests that the downturns in 1990-91 and 2001 were strongly influenced by changes in credit conditions.

JEL-codes: E32 G10 (search for similar items in EconPapers)
Date: 2009-09
New Economics Papers: this item is included in nep-bec, nep-cba, nep-dge and nep-mac
Note: EFG
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (59)

Published as Urban Jermann & Vincenzo Quadrini, 2012. "Macroeconomic Effects of Financial Shocks," American Economic Review, American Economic Association, vol. 102(1), pages 238-71, February.

Downloads: (external link)
http://www.nber.org/papers/w15338.pdf (application/pdf)

Related works:
Journal Article: Macroeconomic Effects of Financial Shocks (2012)
Working Paper: Macroeconomic Effects of Financial Shocks (2009)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:nbr:nberwo:15338

Ordering information: This working paper can be ordered from
http://www.nber.org/papers/w15338

Access Statistics for this paper

More papers in NBER Working Papers from National Bureau of Economic Research, Inc National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.. Contact information at EDIRC.
Bibliographic data for series maintained by ().