scholarly journals Stabilization Policy in a Two Country Model and the Role of Financial Frictions

2001 ◽  
Author(s):  
Ester Faia
Keyword(s):  
Financial Frictions ◽  
Stabilization Policy

scholarly journals Interest Rates, Leverage, and Business Cycles in Emerging Economies: The Role of Financial Frictions

2015 ◽  
Vol 7 (3) ◽  
pp. 153-188 ◽  
Author(s):  
Andrés Fernández ◽  
Adam Gulan
Keyword(s):  
Business Cycles ◽  
Interest Rates ◽  
Open Economy ◽  
Emerging Economies ◽  
Financial Frictions ◽  
Small Open Economy ◽  
Financial Data ◽  
Cycle Model ◽  
Business Cycle Model

Countercyclical country interest rates have been shown to be an important characteristic of business cycles in emerging markets. In this paper we provide a microfounded rationale for this pattern by linking interest rate spreads to the dynamics of corporate leverage. For this purpose we embed a financial accelerator into a business cycle model of a small open economy and estimate it on a novel panel dataset for emerging economies that merges macroeconomic and financial data. The model accounts well for the empirically observed countercyclicality of interest rates and leverage, as well as for other stylized facts. (JEL E13, E32, E43, E44, F41, O11)

Credit and the Labour Share: Evidence from US States

2020 ◽  
Vol 130 (630) ◽  
pp. 1782-1816 ◽  
Author(s):  
Aslı Leblebicioğlu ◽  
Ariel Weinberger
Keyword(s):  
Financial Development ◽  
Financial Frictions ◽  
Us States ◽  
Banking Deregulation ◽  
Interstate Banking ◽  
Percentage Points ◽  
Labour Share ◽  
The Us ◽  
The Relationship

Abstract We investigate the role of credit markets as a cause for changes in the US labour share. Causal evidence is provided that the labour share declined between 0.8 and 1.2 percentage points following the interstate banking deregulation, explaining more than half of the overall reduction during that period. The lower costs of credit and greater bank competition in each state are mechanisms that led to the decline. To quantify the relationship between credit and factor payments, we calibrate a model with financial frictions and highlight financial development as a potential channel for the reduction in labour share observed globally.

scholarly journals Monetary Policy for a Bubbly World

2020 ◽  
Author(s):  
Vladimir Asriyan ◽  
Luca Fornaro ◽  
Alberto Martin ◽  
Jaume Ventura
Keyword(s):  
Monetary Policy ◽  
Private Sector ◽  
Central Bank ◽  
Financial Frictions ◽  
Optimal Monetary Policy ◽  
Future Value ◽  
Money Creation ◽  
The Creation

Abstract What is the role of monetary policy in a bubbly world? To address this question, we study an economy in which financial frictions limit the supply of assets. The ensuing scarcity generates a demand for “unbacked” assets, i.e., assets that are backed only by the expectation of their future value. We consider two types of unbacked assets: bubbles, which are created by the private sector, and money, which is created by the central bank. Bubbles and money share many features, but they also differ in two crucial respects. First, while the rents from the creation of bubbles accrue to entrepreneurs and foster investment, the rents from money creation accrue to the central bank. Second, while bubbles are driven by market psychology, and can rise and fall according to the whims of the market, money is under the control of the central bank. We characterize the optimal monetary policy and show that, through its ability to supply assets, monetary policy plays a key role in the bubbly world. The model sheds light on the recent expansion of central bank liabilities in response to the bursting of bubbles.

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