The macroeconomics of firms' savings

Roc Armenter () and Viktoria Hnatkovska ()

No 12-1, Working Papers from Federal Reserve Bank of Philadelphia

Abstract: The authors document that the U.S. non-financial corporate sector became a net lender in the 2000s, using aggregate and firm-level data. They develop a structural model with investment, debt, and equity. Debt is fiscally advantageous but subject to a no-default borrowing constraint. Equity allows the firm to suspend dividends when the cash flow is negative. Firms accumulate financial assets for precautionary reasons, yet value equity as partial insurance against shocks. The calibrated model replicates the prevalence of net savings in the period 2000-2007 and attributes the rise in corporate savings over the past 40 years to lower dividend taxes.

Keywords: Corporations; Debt; Equity; Dividends; Taxation (search for similar items in EconPapers)
Date: 2011
New Economics Papers: this item is included in nep-dge
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Citations: View citations in EconPapers (11)

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Related works:
Working Paper: The Macroeconomics of Firms' Savings (2012)
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