EconPapers    
Economics at your fingertips  
 

The price of capital and the financial accelerator

Roberto Pancrazi, Hernán D. Seoane and Marija Vukotic

Economics Letters, 2016, vol. 149, issue C, 86-89

Abstract: The price of capital is a key determinant of the financial accelerator, a transmission mechanism of shocks generated through the capital accumulation process of entrepreneurs that borrow in credit markets with frictions. This paper shows that the procedure of approximating the price of old capital by the net-of-depreciation price of new capital, as used in many articles since Bernanke et al. (1999), has profound implications when the capital depreciation rate is positive. When accounting for the appropriate price of capital, the effects of the financial accelerator are even stronger than originally assessed.

Keywords: Financial accelerator; Business fluctuations; Investment adjustment cost (search for similar items in EconPapers)
JEL-codes: E30 E44 E50 (search for similar items in EconPapers)
Date: 2016
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1) Track citations by RSS feed

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0165176516304207
Full text for ScienceDirect subscribers only

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:eee:ecolet:v:149:y:2016:i:c:p:86-89

Access Statistics for this article

Economics Letters is currently edited by Economics Letters Editorial Office

More articles in Economics Letters from Elsevier
Bibliographic data for series maintained by Dana Niculescu ().

 
Page updated 2019-05-24
Handle: RePEc:eee:ecolet:v:149:y:2016:i:c:p:86-89