The Financial Accelerator and the Flight to Quality

Ben Bernanke, Mark Gertler and Simon Gilchrist

No 4789, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: Adverse shocks to the economy may be amplified by worsening credit-market conditions-- the financial 'accelerator'. Theoretically, we interpret the financial accelerator as resulting from endogenous changes over the business cycle in the agency costs of lending. An implication of the theory is that, at the onset of a recession, borrowers facing high agency costs should receive a relatively lower share of credit extended (the flight to quality) and hence should account for a proportionally greater part of the decline in economic activity. We review the evidence for these predictions and present new evidence drawn from a panel of large and small manufacturing firms.

JEL-codes: E32 E44 (search for similar items in EconPapers)
Date: 1994-07
Note: ME
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (114)

Published as Review of Economics and Statistics, vol. LXXVIII, no. 1, February 1996, pp. 1-15

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Related works:
Journal Article: The Financial Accelerator and the Flight to Quality (1996)
Working Paper: The Financial Accelerator and the Flight to Quality (1994)
Working Paper: The financial accelerator and the flight to quality (1994)
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