The magnitude and Cyclical Behavior of Financial Market Frictions
Eric Swanson () and
Andrew Levin ()
No 224, Computing in Economics and Finance 2004 from Society for Computational Economics
We analyze a new panel data set that includes balance sheet information, measures of expected default risk, and credit spreads on publicly-traded debt for more than 900 firms over the period 1997Q1 through 2003Q3. We obtain precise time-specific estimates of the financial frictions parameter underlying the benchmark financial accelerator model of Bernanke, Gertler, and Gilchrist (1999) and clearly reject the null hypothesis of no credit market imperfections; furthermore, for the expansionary period through mid-2000, these estimates are quite similar to the calibrated values used in previous research. Finally, we find that financial market frictions exhibit strong cyclical pattern, with parameter estimates rising by a factor of two during the latest economic downturn before returning to pre-recession levels in 2003.
Keywords: perturbation; policy (search for similar items in EconPapers)
JEL-codes: E00 (search for similar items in EconPapers)
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Working Paper: The Magnitude and Cyclical Behavior of Financial Market Frictions (2005)
Working Paper: The magnitude and cyclical behavior of financial market frictions (2004)
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Persistent link: https://EconPapers.repec.org/RePEc:sce:scecf4:224
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