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The collateral channel under imperfect debt enforcement

Toni Beutler and Mathieu Grobéty

European Economic Review, 2019, vol. 111, issue C, 336-359

Abstract: Does imperfect enforceability of debt contracts amplify the sensitivity of industry growth to collateral values? To answer this question, we introduce a novel industry-specific measure of real asset redeployability – the ease with which real assets are transferred to alternative uses – as a proxy for liquidation values of collateral. Our measure exploits the heterogeneity of expenditures in new and used capital and the heterogeneity in the composition of real asset holdings across US industries. Using a cross-industry cross-country approach, we find that industry growth is more sensitive to changes in collateral values in countries with weaker debt enforcement.

Keywords: Growth; Collateral channel; Redeployability; Debt enforcement (search for similar items in EconPapers)
JEL-codes: O43 E44 G33 E32 (search for similar items in EconPapers)
Date: 2019
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Working Paper: The Collateral Channel under Imperfect Debt Enforcement (2011) Downloads
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