EconPapers    
Economics at your fingertips  
 

The external finance premium and the macroeconomy: US post-WWII evidence

Ferre De Graeve

No 809, Working Papers from Federal Reserve Bank of Dallas

Abstract: The central variable of theories of financial frictions--the external finance premium--is unobservable. This paper distils the external finance premium from a DSGE model estimated on U.S. macroeconomic data. Within the DSGE framework, movements in the premium can be given an interpretation in terms of shocks driving business cycles. A key result is that the estimate--based solely on nonfinancial macroeconomic data--picks up over 70 percent of the dynamics of lower grade corporate bond spreads. The paper also identifies a gain in fitting key macroeconomic aggregates by including financial frictions in the model and documents how shock transmission is affected.

Keywords: Financial markets; Corporate bonds; Corporations - Finance (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cba, nep-dge and nep-mac
Date: 2008
Note: Published as: De Graeve, Ferre (2008), "The External Finance Premium and the Macroeconomy: US Post–WWII Evidence," Journal of Economic Dynamics and Control 32 (1): 3415-3440.
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (84) Track citations by RSS feed

Downloads: (external link)
http://dallasfed.org/assets/documents/research/papers/2008/wp0809.pdf (application/pdf)

Related works:
Journal Article: The external finance premium and the macroeconomy: US post-WWII evidence (2008) Downloads
Working Paper: The External Finance Premium and the Macroeconomy: US post-WWII Evidence (2007) Downloads
Working Paper: The External Finance Premium and the Macroeconomy: US post-WWII Evidence (2007) Downloads
Working Paper: The External Finance Premium and the Macroeconomy: US post-WWII Evidence (2006) Downloads
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:fip:feddwp:0809

Ordering information: This working paper can be ordered from

Access Statistics for this paper

More papers in Working Papers from Federal Reserve Bank of Dallas Contact information at EDIRC.
Bibliographic data for series maintained by Amy Chapman ().

 
Page updated 2019-10-17
Handle: RePEc:fip:feddwp:0809