scholarly journals Erratum to: Shocks, financial constraints and households’ consumption amid the great recession

2021 ◽  
Vol 68 (2) ◽  
pp. 253-253
Author(s):  
E Editorial
Keyword(s):  
Great Recession ◽  
Financial Constraints ◽  
The Great Recession ◽  
Editing Process ◽  
Font Color

After publication of the original article, it came to the authors? attention that during the editing process a mathematical operator is missing in the text on pages 5 and 12. <br><br><font color="red"><b> Link to the corrected article <u><a href="http://dx.doi.org/10.2298/PAN2101001A">10.2298/PAN2101001A</a></b></u>

scholarly journals Shocks, financial constraints and households’ consumption amid the great recession

2021 ◽  
Vol 68 (1) ◽  
pp. 1-33
Author(s):  
Philip Arestis ◽  
Germana Corrado ◽  
Luisa Corrado
Keyword(s):  
Great Recession ◽  
Financial Constraints ◽  
Local Level ◽  
Sample Selection ◽  
Careful Analysis ◽  
The Great Recession ◽  
Credit Lines ◽  
Outstanding Debt ◽  
Main Determinants ◽  
The Impact

Overall, there is now considerable evidence that financial constraints are at the root of the lack of consumption smoothing during the Great Recession. We push this evidence forward and show that in the presence of credit constraints, a job loss leads to larger drops in households? consumption. We build a set of testable hypotheses from our theoretical model and employ microdata taken from the second round of the Life in Transition Survey (LiTS II) (European Bank for Reconstruction and Development 2010). We specifically assess the role of financial constraints in explaining households? consumption coping strategies after the crisis shocks. Economic hardship is more likely to be observed if households experience difficulties in meeting outstanding debt obligations or in obtaining new credit lines because of financial constraints. The impact of job and wage shocks on households? consumption is much attenuated, by around a half, when we control for sample selection bias in accessing the formal credit markets. In the context of increasing impoverishment across Europe, the paper shows that a careful analysis of the main determinants of households? economic and financial hardship is crucial to formulate targeted measures at the regional and local level.

scholarly journals Endogenous Liquidity and the Business Cycle

2015 ◽  
Vol 105 (6) ◽  
pp. 1883-1927 ◽  
Author(s):  
Saki Bigio
Keyword(s):  
Asymmetric Information ◽  
Business Cycle ◽  
Great Recession ◽  
Financial Constraints ◽  
Aggregate Fluctuations ◽  
The Great Recession ◽  
The Business Cycle ◽  
The Cost

I study an economy where asymmetric information about the quality of capital endogenously determines liquidity. Liquid funds are key to relaxing financial constraints on investment and employment. These funds are obtained by selling capital or using it as collateral. Liquidity is determined by balancing the costs of obtaining liquidity under asymmetric information against the benefits of relaxing financial constraints. Aggregate fluctuations follow increases in the dispersion of capital quality, which raise the cost of obtaining liquidity. An estimated version of the model can generate patterns for quantities and credit conditions similar to the Great Recession. (JEL D82, E22, E24, E32, E44, G01)

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