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A Theory of Banks, Bonds, and the Distribution of Firm Size

Diego Valderrama () and Katheryn Russ ()

No 4, Working Papers from University of California, Davis, Department of Economics

Abstract: Does targeted financial development favor small firms or large ones? And how do resulting changes in the distribution of firm size affect aggregate outcomes? We assess the macroeconomic implications of known stylized facts from the finance literature regarding firm size and financial frictions for the real economy. In an era of intense policy debate over the role of market-based finance in the macroeconomy, we find that considering the entire distribution of firm size is key to accurately assess the effects of targeted financial policies on macroeconomic outcomes and firm behavior.

Keywords: heterogeneity; bank; bond; distribution of firm size (search for similar items in EconPapers)
JEL-codes: E10 G11 G12 G32 L11 (search for similar items in EconPapers)
Date: 2009-10-15
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Working Paper: A theory of banks, bonds, and the distribution of firm size (2009) Downloads
Working Paper: A Theory of Banks, Bonds, and the Distribution of Firm Size (2009) Downloads
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