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External financing and the role of financial frictions over the business cycle: Measurement and theory

Ariel Zetlin-Jones and Ali Shourideh

Journal of Monetary Economics, 2017, vol. 92, issue C, 1-15

Abstract: Empirically, there is substantial cross-sectional variation in firms’ use of external funds: roughly 80% of investment by privately held firms is financed externally, compared to 20% for publicly traded firms. In a model consistent with privately held and publicly traded firms’ use of external funds, financial shocks generate only a modest response of output. This exercise casts doubt on the ability of financial shocks to generate significant economic fluctuations and emphasizes the role of non-financial linkages in understanding the importance of financial shocks.

Keywords: External financing; Financial frictions; Financial shocks (search for similar items in EconPapers)
Date: 2017
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Related works:
Working Paper: External Financing and the Role of Financial Frictions over the Business Cycle: Measurement and Theory (2012) Downloads
Working Paper: External Financing and the Role of Financial Frictions over the Business Cycle: Measurement and Theory (2012) Downloads
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