Unemployment and credit risk

• 成果类型: Article
• 署名作者: Bai, Hang
• 署名单位: University of Connecticut
• 刊物名称: JOURNAL OF FINANCIAL ECONOMICS
• ISSN/ISSBN: 0304-405X
• DOI: 10.1016/j.jfineco.2021.05.046
• 发表日期: 2021
• 页码: 127-145
• 关键词: default; Credit spread; search and matching; unemployment

摘要

Labor market frictions help explain the credit spread puzzle. In U.S. aggregate data and newly assembled U.S. industry-level and cross-country panel datasets, the relation between unemployment and credit risk is strong and positive. In a search model of equilibrium unemployment embedded with defaultable debt and capital accumulation, search frictions create downward rigidity in expected search costs, hindering firms from repaying creditors particularly in bad times and rendering corporate debt riskier. Quantitatively, the model replicates the strongly positive relation between unemployment and credit risk as well as salient features of the credit spread, including its level, volatility, cyclicality, and skewness. (c) 2021 Elsevier B.V. All rights reserved.