The Role of Financial Frictions During the Crisis
Author : Rossana Merola
Publisher :
Page : 40 pages
File Size : 16,88 MB
Release : 2013
Category :
ISBN :
Author : Rossana Merola
Publisher :
Page : 40 pages
File Size : 16,88 MB
Release : 2013
Category :
ISBN :
Author : Ms. Valerie Cerra
Publisher : International Monetary Fund
Page : 30 pages
File Size : 47,6 MB
Release : 2021-06-25
Category : Business & Economics
ISBN : 1484325273
One of the most puzzling facts in the wake of the Global Financial Crisis (GFC) is that output across advanced and emerging economies recovered at a much slower rate than anticipated by most forecasting agencies. This paper delves into the mechanics behind the observed slow recovery and the associated permanent output losses in the aftermath of the crisis, with a particular focus on the role played by financial frictions and investment dynamics. The paper provides two main contributions. First, we empirically document that lower investment during financial crises is the key factor leading to permanent loss of output and total factor productivity (TFP) in the wake of a crisis. Second, we develop a DSGE model with financial frictions and capital-embodied technological change capable of reproducing the empirical facts. We also evaluate the role of financial policies in stabilizing output and TFP in response to disruptions in financial markets.
Author : Mr.Romain A Duval
Publisher : International Monetary Fund
Page : 32 pages
File Size : 44,86 MB
Release : 2017-05-31
Category : Business & Economics
ISBN : 1484302591
We study the role of financial frictions in explaining the sharp and persistent productivity growth slowdown in advanced economies after the 2008 global financial crisis. Using a rich cross-country, firm-level data set and exploiting quasi-experimental variation in firm-level exposure to the crisis, we find that the combination of pre-existing firm-level financial fragilities and tightening credit conditions made an important contribution to the post-crisis productivity slowdown. Specifically: (i) firms that entered the crisis with weaker balance sheets experienced decline in total factor productivity growth relative to their less vulnerable counterparts after the crisis; (ii) this decline was larger for firms located in countries where credit conditions tightened more; (iii) financially fragile firms cut back on intangible capital investment compared to more resilient firms, which is one plausible way through which financial frictions undermined productivity. All of these effects are highly persistent and quantitatively large—possibly accounting on average for about a third of the post-crisis slowdown in within-firm total factor productivity growth. Furthermore, our results are not driven by more vulnerable firms being less productive or having experienced slower productivity growth before the crisis, or differing from less vulnerable firms along other dimensions.
Author : Rossana Merola
Publisher :
Page : pages
File Size : 31,6 MB
Release : 2013
Category :
ISBN :
Author : Marzie Taheri Sanjani
Publisher : International Monetary Fund
Page : 33 pages
File Size : 46,33 MB
Release : 2014-10-23
Category : Business & Economics
ISBN : 1498320759
This paper estimates a New Keynesian DSGE model with an explicit financial intermediary sector. Having measures of financial stress, such as the spread between lending and borrowing, enables the model to capture the impact of the financial crisis in a more direct and efficient way. The model fits US post-war macroeconomic data well, and shows that financial shocks play a greater role in explaining the volatility of macroeconomic variables than marginal efficiency of investment (MEI) shocks.
Author : Mr.Luc Laeven
Publisher : International Monetary Fund
Page : 37 pages
File Size : 17,12 MB
Release : 2011-03-01
Category : Business & Economics
ISBN : 1455218979
We collect new data to assess the importance of supply-side credit market frictions by studying the impact of financial sector recapitalization packages on the growth performance of firms in a large cross-section of 50 countries during the recent crisis. We develop an identification strategy that uses the financial crisis as a shock to credit supply and exploits exogenous variation in the degree to which firms depend on external financing for investment needs, and focus on policy interventions aimed at alleviating the bank capital crunch. We find that the growth of firms dependent on external financing is disproportionately positively affected by bank recapitalization policies, and that this effect is quantitatively important and robust to controlling for other financial sector support policies. We also find that fiscal policy disproportionately boosted growth of firms more dependent on external financing. These results provide new evidence of a quantitatively important role of credit market frictions in influencing real economic activity.
Author : Mr.Stijn Claessens
Publisher : International Monetary Fund
Page : 66 pages
File Size : 40,21 MB
Release : 2013-01-30
Category : Business & Economics
ISBN : 1475561008
This paper reviews the literature on financial crises focusing on three specific aspects. First, what are the main factors explaining financial crises? Since many theories on the sources of financial crises highlight the importance of sharp fluctuations in asset and credit markets, the paper briefly reviews theoretical and empirical studies on developments in these markets around financial crises. Second, what are the major types of financial crises? The paper focuses on the main theoretical and empirical explanations of four types of financial crises—currency crises, sudden stops, debt crises, and banking crises—and presents a survey of the literature that attempts to identify these episodes. Third, what are the real and financial sector implications of crises? The paper briefly reviews the short- and medium-run implications of crises for the real economy and financial sector. It concludes with a summary of the main lessons from the literature and future research directions.
Author : Francesco Furlanetto
Publisher : International Monetary Fund
Page : 44 pages
File Size : 19,22 MB
Release : 2014-07-18
Category : Business & Economics
ISBN : 1498331157
The recent global financial crisis illustrates that financial frictions are a significant source of volatility in the economy. This paper investigates monetary policy stabilization in an environment where financial frictions are a relevant source of macroeconomic fluctuation. We derive a measure of output gap that accounts for frictions in financial market. Furthermore we illustrate that, in the presence of financial frictions, a benevolent central bank faces a substantial trade-off between nominal and real stabilization; optimal monetary policy significantly reduces fluctuations in price and wage inflations but fails to alleviate the output gap volatility. This suggests a role for macroprudential policies.
Author :
Publisher : Lulu.com
Page : 294 pages
File Size : 39,24 MB
Release : 2004
Category : Bank capital
ISBN : 9291316695
Author : Mr.Jaromir Benes
Publisher : International Monetary Fund
Page : 59 pages
File Size : 36,80 MB
Release : 2014-04-04
Category : Business & Economics
ISBN : 1475524986
This paper presents the theoretical structure of MAPMOD, a new IMF model designed to study vulnerabilities associated with excessive credit expansions, and to support macroprudential policy analysis. In MAPMOD, bank loans create purchasing power that facilitates adjustments in the real economy. But excessively large and risky loans can impair balance sheets and sow the seeds of a financial crisis. Banks respond to losses through higher spreads and rapid credit cutbacks, with adverse effects for the real economy. These features allow the model to capture the basic facts of financial cycles. A companion paper studies the simulation properties of MAPMOD.