The External Finance Premium and the Macroeconomy: US post-WWII Evidence

F. Degraeve ()
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F. Degraeve: -
Authors registered in the RePEc Author Service: Ferre De Graeve

Working Papers of Faculty of Economics and Business Administration, Ghent University, Belgium from Ghent University, Faculty of Economics and Business Administration

Abstract: The central variable of theories of financial frictions -the external finance premium- is unobservable. This paper distils the external .finance premium from a DSGE model estimated on US macroeconomic data. Within the DSGE framework, movements in the premium can be given an interpretation in terms of shocks driving business cycles. A key result is that the estimate -based solely on non-.financial macroeconomic data- picks up over 70% of the dynamics of lower grade corporate bond spreads. The paper also identifies a gain in .fitting key macroeconomic aggregates by including .financial frictions in the model and documents how shock transmission is affected.

Keywords: external finance premium; financial frictions; DSGE; Bayesian estimation (search for similar items in EconPapers)
JEL-codes: E4 E5 G32 (search for similar items in EconPapers)
Pages: 47 pages
Date: 2007-09
New Economics Papers: this item is included in nep-cba, nep-dge and nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

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http://wps-feb.ugent.be/Papers/wp_07_482.pdf (application/pdf)

Related works:
Journal Article: The external finance premium and the macroeconomy: US post-WWII evidence (2008)
Working Paper: The external finance premium and the macroeconomy: US post-WWII evidence (2008)
Working Paper: The External Finance Premium and the Macroeconomy: US post-WWII Evidence (2007)
Working Paper: The External Finance Premium and the Macroeconomy: US post-WWII Evidence (2006)
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Persistent link: https://EconPapers.repec.org/RePEc:rug:rugwps:07/482

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