How large is the Financial Accelerator? Some Evidence from Firm-level Data

Sarah Marit Lein, Gregor Bäurle, Sarah M. Lein and Elizabeth Steiner

VfS Annual Conference 2016 (Augsburg): Demographic Change from Verein für Socialpolitik / German Economic Association

Abstract: This paper analyzes how the size and composition of the balance sheet affects firms financing cost within a large panel of Swiss firms in the non-financial sector from 1998 to 2011. The data includes a large number of small firms, which makes the data representative. We use an instrumental variables approach to identify the investment finance supply curve. Our finding that financing cost increase with exogenous changes in leverage supports the financial accelerator mechanism a la Bernanke, Gertler and Gilchrist. We quantitatively evaluate the implications of our findings for the aggregate business cycle and find that the amplification mechanism of the financial accelerator is economically significant: the volatility of the business cycle is amplified by a factor of 2.25 due to the presence of the financial accelerator channel.

JEL-codes: E22 E32 E44 (search for similar items in EconPapers)
Date: 2016
New Economics Papers: this item is included in nep-bec and nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
https://www.econstor.eu/bitstream/10419/145600/1/VfS_2016_pid_6479.pdf (application/pdf)

Related works:
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:zbw:vfsc16:145600

Access Statistics for this paper

More papers in VfS Annual Conference 2016 (Augsburg): Demographic Change from Verein für Socialpolitik / German Economic Association Contact information at EDIRC.
Bibliographic data for series maintained by ZBW - Leibniz Information Centre for Economics ().