Credit Constraints, Firm Dynamics and the Transmission of External Financial Shocks

Sangeeta Pratap and Carlos Urrutia ()

No 124, 2007 Meeting Papers from Society for Economic Dynamics

Abstract: 1989 to 2000, and analyze the effect of the 1994 crisis modeled as an unexpected increase in the risk free rate. The model predicts: (i) a real exchange rate depreciation, (ii) an increase in the debt burden, (ii) a drop in output, (iii) a large decline in investment, (iv) an increase in exports. These real effects are consistent with the evidence for the Mexican crisis.

Date: 2007
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Persistent link: https://EconPapers.repec.org/RePEc:red:sed007:124

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