Financial intermediation, investment dynamics and business cycle fluctuations
No 2012-67, Finance and Economics Discussion Series from Board of Governors of the Federal Reserve System (U.S.)
I use micro data to quantify key features of U.S. firm financing. In particular, I establish that a substantial 35% of firms' investment is funded using financial markets. I then construct a dynamic equilibrium model that matches these features and fit the model to business cycle data using Bayesian methods. In the model, stylized banks enable trades of financial assets, directing funds towards investment opportunities, and charge an intermediation spread to cover their costs. According to the model estimation, exogenous shocks to the intermediation spread explain 35% of GDP and 60% of investment volatility.
New Economics Papers: this item is included in nep-ban, nep-bec, nep-dge and nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (37) Track citations by RSS feed
Downloads: (external link)
Journal Article: Financial Intermediation, Investment Dynamics, and Business Cycle Fluctuations (2016)
Working Paper: Financial intermediation, investment dynamics and business cycle fluctuations (2011)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:fip:fedgfe:2012-67
Access Statistics for this paper
More papers in Finance and Economics Discussion Series from Board of Governors of the Federal Reserve System (U.S.) Contact information at EDIRC.
Bibliographic data for series maintained by Ryan Wolfslayer ; Keisha Fournillier ().