Dispersion in Financing Costs and Development

Cezar Santos, Tiago Cavalcanti, Joseph Kaboski and Bruno Martins

No 15930, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: Most aggregate theories of financial frictions model credit available at a single cost of financing but rationed. However, using a comprehensive firm-level credit registry, we document both high levels and high dispersion in credit spreads to Brazilian firms. We develop a quantitative dynamic general equilibrium model in which dispersion in spreads arise from intermediation costs and market power. Calibrating to the Brazilian data, we show that, for equivalent levels of external financing, dispersion has more profound impacts on aggregate development than single-price credit rationing and yields firm dynamics that are more consistent with observed patterns.

Date: 2021-03
New Economics Papers: this item is included in nep-dge
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Citations: View citations in EconPapers (7)

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Related works:
Working Paper: Dispersion in Financing Costs and Development (2021)
Working Paper: Dispersion in Financing Costs and Development (2019)
Working Paper: Dispersion in Financing Costs and Development (2018)
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