Asset Quality Dynamics

P. Dean Corbae and Erwan Quintin ()

No 368, 2019 Meeting Papers from Society for Economic Dynamics

Abstract: We provide a simple corporate finance environment with endogenous security design which aggregates to a standard macroeconomic model. The model is quantitatively consistent with the cyclical properties of safe corporate debt issues, in particular with the fact that those issues are less procyclical than other sources of corporate financing. It is also consistent with the countercyclicality of risk spreads on corporate debt. We then use the model to measure the effect of a protracted periods of low safe yields, one of the main features of the so-called "saving glut" the global economy is currently experiencing. A long period of low interest rates on safe debt has little impact on the level of economic activity but causes output and investment volatility to fall.

Date: 2019
New Economics Papers: this item is included in nep-dge and nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
https://red-files-public.s3.amazonaws.com/meetpapers/2019/paper_368.pdf (application/pdf)

Related works:
Working Paper: Asset Quality Dynamics (2016)
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:red:sed019:368

Access Statistics for this paper

More papers in 2019 Meeting Papers from Society for Economic Dynamics Society for Economic Dynamics Marina Azzimonti Department of Economics Stonybrook University 10 Nicolls Road Stonybrook NY 11790 USA. Contact information at EDIRC.
Bibliographic data for series maintained by Christian Zimmermann ().