Article ID | Journal | Published Year | Pages | File Type |
---|---|---|---|---|
5098082 | Journal of Economic Dynamics and Control | 2016 | 32 Pages |
Abstract
This paper examines whether financial conditions of the non-financial corporate sector can explain why the recovery from recessions in the United States is slower since the mid-1980s. Leverage by the corporate sector has increased significantly since the financial deregulation of the mid-1980s. Empirical evidence shows that slow recoveries are associated with a significant drop in the growth rates of investment and bank loans, and with a surge in the growth rates of corporate bonds. In an estimated dynamic stochastic general equilibrium model with a financial accelerator, counterfactual experiments based on estimates of two samples - 1965-1983 and 1984-2007 - show that the non-financial corporate indebtedness affects only marginally the speed of the recovery in the two samples.
Related Topics
Physical Sciences and Engineering
Mathematics
Control and Optimization
Authors
Frank Smets, Stefania Villa,