Financial Frictions and Fluctuations in Volatility

• 成果类型: Article
• 署名作者: Arellano, Cristina; Bai, Yan; Kehoe, Patrick J.
• 署名单位: Federal Reserve System - USA; Federal Reserve Bank - Minneapolis; University of Minnesota System; University of Minnesota Twin Cities; National Bureau of Economic Research; University of Rochester; Stanford University
• 刊物名称: JOURNAL OF POLITICAL ECONOMY
• ISSN/ISSBN: 0022-3808
• DOI: 10.1086/701792
• 发表日期: 2019
• 页码: 2049-2103
• 关键词: uncertainty; persistence; COSTS; price

摘要

The US Great Recession featured a large decline in output and labor, tighter financial conditions, and a large increase in firm growth dispersion. We build a model in which increased volatility at the firm level generates a downturn and worsened credit conditions. The key idea is that hiring inputs is risky because financial frictions limit firms' ability to insure against shocks. An increase in volatility induces firms to reduce their inputs to reduce such risk. Our model can generate most of the decline in output and labor in the Great Recession and the observed increase in firms' interest rate spreads.