Reassessing the Relevance of Financial Shocks in an Estimated Heterogeneous Firm Mode

• 成果类型: Article
• 署名作者: Guo, Xing
• 署名单位: Bank of Canada
• 刊物名称: AMERICAN ECONOMIC JOURNAL-MACROECONOMICS
• ISSN/ISSBN: 1945-7707
• DOI: 10.1257/mac.20200447
• 发表日期: 2024
• 页码: 131-159
• 关键词: business cycles; INVESTMENT; decisions; POLICY

摘要

I study the transmission of financial shocks using an estimated het-erogeneous firm model. Following a contractionary financial shock,financially constrained firms cut investment, but unconstrained firms increase investment due to the lower capital price and interest rate. After matching the empirical dynamics of prices and the price elasticity of investment, I find a limited role of the unconstrained firms' response in dampening the aggregate investment decline. Nonfinancial capital adjustment friction is the key to generating this result. Without the capital adjustment friction, unconstrained firms' investment becomes unrealistically sensitive to prices, and the model would understate the financial shocks' aggregate relevance