Financial Innovations and Macroeconomic Volatility

Vincenzo Quadrini and Urban Jermann

No 5727, CEPR Discussion Papers from Centre for Economic Policy Research

Abstract: The volatility of US business cycle has declined during the last two decades. During the same period the financial structure of firms has become more volatile. In this paper we develop a model in which financial factors play a key role in generating economic fluctuations. Innovations in financial markets allow for greater financial flexibility and generate a lower volatility of output together with a higher volatile in the financial structure of firms.

Keywords: Financing constraints; Debt-equity finance; Business cycle (search for similar items in EconPapers)
JEL-codes: E3 G1 G3 (search for similar items in EconPapers)
Date: 2006-06
New Economics Papers: this item is included in nep-dge, nep-fin, nep-his and nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (84)

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Related works:
Working Paper: Financial Innovations and Macroeconomic Volatility (2007)
Working Paper: Financial Innovations and Macroeconomic Volatility (2006)
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