A model of slow recoveries from financial crises

Albert Queralto

Journal of Monetary Economics, 2020, vol. 114, issue C, 1-25

Abstract: Output and productivity fall persistently following financial crises, and innovation efforts also decline in these episodes. After reviewing the evidence, this paper introduces a quantitative macroeconomic model featuring endogenous growth in total factor productivity (TFP) through innovation, in which innovators’ financing is subject to frictions. These frictions become more severe as financial sector balance sheets deteriorate, increasing the cost of credit for innovators and thereby lowering the growth rate of TFP. Key parameters are estimated using data from the South Korean 1997 financial crisis. Financial frictions are found to amplify significantly the medium-run TFP and output losses following the crisis.

Keywords: Business cycles; Financial crises; Total factor productivity (search for similar items in EconPapers)
JEL-codes: E32 E44 F41 (search for similar items in EconPapers)
Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (41)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0304393219300546
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:moneco:v:114:y:2020:i:c:p:1-25

DOI: 10.1016/j.jmoneco.2019.03.008

Access Statistics for this article

Journal of Monetary Economics is currently edited by R. G. King and C. I. Plosser

More articles in Journal of Monetary Economics from Elsevier
Bibliographic data for series maintained by Catherine Liu ().