scholarly journals External financing and the role of financial frictions over the business cycle: Measurement and theory

2017 ◽  
Vol 92 ◽  
pp. 1-15 ◽  
Author(s):  
Ariel Zetlin-Jones ◽  
Ali Shourideh
Keyword(s):  
Business Cycle ◽  
Financial Frictions ◽  
External Financing ◽  
The Business Cycle

ASYMMETRY AND THE AMPLITUDE OF BUSINESS CYCLE FLUCTUATIONS: A QUANTITATIVE INVESTIGATION OF THE ROLE OF FINANCIAL FRICTIONS

2016 ◽  
Vol 22 (2) ◽  
pp. 279-306 ◽  
Author(s):  
Manoj Atolia ◽  
John Gibson ◽  
Milton Marquis
Keyword(s):  
Business Cycles ◽  
Business Cycle ◽  
Financial Frictions ◽  
Quantitative Investigation ◽  
Macroeconomic Volatility ◽  
Access To Credit ◽  
Business Cycle Fluctuations ◽  
Key Features ◽  
The Business Cycle

We examine the quantitative significance of financial frictions that reduce firms' access to credit in explaining asymmetric business cycles characterized by disproportionately severe downturns. Using rate spread data to calibrate the severity of these frictions, we successfully match several key features of U.S. data. Specifically, although output and consumption are relatively symmetric (with output being slightly more asymmetric), investment and hours worked display significant asymmetry over the business cycle. We also demonstrate that our financial frictions are capable of significantly amplifying adverse shocks during severe downturns. Although the data suggest that these frictions are only active occasionally, our results indicate that they are still a significant source of macroeconomic volatility over the business cycle.

scholarly journals Inequality over the business cycle: the role of distributive shocks

2021 ◽  
pp. 1-30
Author(s):  
Marius Clemens ◽  
Ulrich Eydam ◽  
Maik Heinemann
Keyword(s):  
Income Inequality ◽  
Income Distribution ◽  
Business Cycle ◽  
Parameter Estimates ◽  
Panel Estimation ◽  
Bayesian Techniques ◽  
Elasticity Of Intertemporal Substitution ◽  
Ex Ante ◽  
The Business Cycle

Abstract This paper examines how wealth and income inequality dynamics are related to fluctuations in the functional income distribution over the business cycle. In a panel estimation for OECD countries between 1970 and 2016, although inequality is, on average countercyclical and significantly associated with the capital share, one-third of the countries display a pro- or noncyclical relationship. To analyze the observed pattern, we incorporate distributive shocks into an RBC model, where agents are ex ante heterogeneous with respect to wealth and ability. We find that whether wealth and income inequality behave countercyclically or not depends on the elasticity of intertemporal substitution and the persistence of shocks. We match the model to quarterly US data using Bayesian techniques. The parameter estimates point toward a non-monotonic relationship between productivity and inequality fluctuations. On impact, inequality increases in response to TFP shocks but subsequently declines. Furthermore, TFP shocks explain 17% of inequality fluctuations.

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