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Author: Tatsuro Senga Publisher: ISBN: Category : Languages : en Pages : 135
Book Description
In the second chapter, "Default Risk and Aggregate Fluctuations in an Economy with Production Heterogeneity," with Aubhik Khan and Julia K. Thomas, I study an economy where firms have persistent differences in productivities, capital, and debt or financial assets. Investment is funded by retained earnings and non-contingent debt. Because firms may default on their loans, the unit cost of borrowing rises with the debt a firm undertakes and falls with its collateral. This drives an inefficient allocation of capital; on average, large firms with more collateral invest more than do small firms with less collateral. In response to a credit shock worsening firms' cash positions, the model predicts a sharp response consistent with several aspects of the 2007 U.S. recession. Measured TFP falls over several periods, as do employment, investment and GDP. The subsequent recovery is gradual given slow recoveries in TFP, aggregate capital, and the measure and distribution of firms. In the third chapter, "Uncertainty Shocks and Liquidity Crisis with Adverse Selection," I study the impact of uncertainty shocks in an economy with asymmetric information in the asset market. Firms are heterogeneous in productivity, and they finance investment by issuing long-term, non-contingent loans. Each lender underwrites and securitizes loans in a market where households participate as buyers without knowing the quality of underlying assets. This adverse selection problem worsens following a shock to the dispersion of firm productivity. Trading volumes and the prices for securitized loans fall, and this in turn adversely affects investment at the firm level.
Author: Tatsuro Senga Publisher: ISBN: Category : Languages : en Pages : 135
Book Description
In the second chapter, "Default Risk and Aggregate Fluctuations in an Economy with Production Heterogeneity," with Aubhik Khan and Julia K. Thomas, I study an economy where firms have persistent differences in productivities, capital, and debt or financial assets. Investment is funded by retained earnings and non-contingent debt. Because firms may default on their loans, the unit cost of borrowing rises with the debt a firm undertakes and falls with its collateral. This drives an inefficient allocation of capital; on average, large firms with more collateral invest more than do small firms with less collateral. In response to a credit shock worsening firms' cash positions, the model predicts a sharp response consistent with several aspects of the 2007 U.S. recession. Measured TFP falls over several periods, as do employment, investment and GDP. The subsequent recovery is gradual given slow recoveries in TFP, aggregate capital, and the measure and distribution of firms. In the third chapter, "Uncertainty Shocks and Liquidity Crisis with Adverse Selection," I study the impact of uncertainty shocks in an economy with asymmetric information in the asset market. Firms are heterogeneous in productivity, and they finance investment by issuing long-term, non-contingent loans. Each lender underwrites and securitizes loans in a market where households participate as buyers without knowing the quality of underlying assets. This adverse selection problem worsens following a shock to the dispersion of firm productivity. Trading volumes and the prices for securitized loans fall, and this in turn adversely affects investment at the firm level.
Author: Julieta Caunedo Publisher: ISBN: Category : Electronic dissertations Languages : en Pages : 158
Book Description
"Essays on Heterogeneity, Irreversibility and Aggregate Fluctuations" explores the connections between micro structure and technologies available to the agents operating in the economy and the dynamic of aggregate output and productivity. The thesis aims at further understanding the linkages between investment decisions of heterogeneous firms, the industry structure, and the aggregate dynamic of the economy. The hypothesis explored in this dissertation is that the dynamic of the industry structure, the patterns of selection of firms and investment within an industry bear information as of the efficiency with which the economy operates. The thesis consist of three essays organized in chapters. Chapter I, "Efficiency with Equilibrium Marginal Product Dispersion and Firm Selection" investigates conditions under which reductions in marginal product of capital dispersion induce Pareto improving allocations. The main result is that it is possible for allocations that display higher marginal product dispersion to be closer to the efficient one than allocations with lower marginal product dispersion. Chapter II, "Industry Dynamics, Investment and Business Cycles" investigates the quantitative implications of irreversibilities in investment for aggregate productivity. The main result of the essay is that for a calibrated economy to the US manufacturing sector, efficiency losses associated to firm selection are quantitatively more important than those associated to lower equilibrium dispersion in marginal products, i.e. capital reallocation. Chapter III, "Aggregate Fluctuations and the Industry Structure of the US Economy" documents changes in the input matrix of the US economy, and analyzes its implications for the relevance of sector specific and neutral shocks in aggregate fluctuations. The main finding is that an economy where the input output entries are allowed to fluctuate as in the data generates larger amplification of shocks and a stronger role for neutral shocks than a comparable economy with a fixed input output structure.
Author: Guanliang Hu Publisher: ISBN: Category : Languages : en Pages : 0
Book Description
Recent papers have pointed to the role of fluctuation in the second-moment of firm productivity (or demand) in generating aggregate fluctuations. However, the commonly used model which assumes an AR(1) process of productivity has two implications that are inconsistent with data: (i) the economy recovers from a downturn induced by an increase in the second-moment much faster in the model than in SVAR; and (ii) in the model, a large increase in the second-moment leads to an increase in investment rate dispersion, which is not observed in the data. To address these inconsistencies, I propose a general information structure which allows for a rich specification of second-moment shocks and find one of them that can resolve these inconsistencies. In chapter 1, using data on US publicly traded firms, I document the stylized facts that firms experience larger changes in productivity will have larger uncertainty in future and that this association decreases over time. Motivated by these facts, I propose a general information structure, which incorporates a learning process, and embed it into a heterogeneous-firm RBC model. I then consider an economy without aggregate shocks and show that this information structure can explain well these facts both qualitatively and quantitatively. In chapter 2, based on the model framework developed in chapter 1, I study four types of second-moment shocks: shocks to the second-moment of persistent productivity (i.e., the standard formation in the literature), shocks to frequency of persistent productivity change, shocks to the second-moment of transitory productivity, and shocks to the second-moment of signal noises. Specifically, I estimate four models, each of which has one type of second-moment shocks. I find that the model that best fits data on firm-level and aggregate uncertainty is the one that has shocks to the second-moment of transitory productivity. In chapter 3, I explore the quantitative implications of each model estimated in chapter 2. I find the model with the best fit solves the aforementioned inconsistencies with the data. This result suggests a new reasonable way to model fluctuation in uncertainty.
Author: Christian D. Bustamante Amaya Publisher: ISBN: Category : Macroeconomics Languages : en Pages : 119
Book Description
In these essays, I study the interplay of monetary policy with agent heterogeneity in economies with frictional markets. While accounting for the heterogeneity observed at the micro level, I investigate the implications of having persistent differences in firms and households' balance sheets and their consequences for business cycle fluctuations in monetary economies during both normal times and in times of economic distress. In the first chapter, “Debt Overhang, Monetary Policy, and Economic Recoveries After Large Recessions”, I explore why conventional monetary policy was so ineffective in mitigating the severity of the 2007 U.S. recession and unsuccessful thereafter in stimulating aggregate demand. Linking firm-level data with predictions from a model, I show that accounting for individual firms’ debt structures is crucial in explaining why business investment fell so dramatically through the recession and remained low for several years, despite the Federal Reserve repeatedly cutting its target interest rate until conventional policy tools were exhausted. Using a sample of publicly traded firms, I establish that firms with greater long-term debt exposure experienced larger contractions and slower recoveries in their investment expenditure. Next, I show that debt overhang episodes were unusually prevalent over the years following the onset of the recession, and particularly so among firms relying more heavily on long-maturing debt. To understand these microeconomic observations and their implications for aggregates, I develop a New Keynesian model where heterogeneous firms finance investment using defaultable nominal long-term debt and where the central bank faces an explicit zero lower bound constraint. There, the greater a firm’s leverage, the higher its likelihood of experiencing a debt overhang episode following a large aggregate shock. Moreover, the severity of debt overhang problems, and their consequences for the distribution and level of aggregate investment, compounds with (1) an increased real value of debt, i.e., debt deflation, and (2) the monetary authority’s inability to restore inflation once nominal interest rates reach the zero lower bound. Together, firms’ long maturity debt positions and the binding zero lower bound are critical in transmitting the consequences of a deep recession into a remarkably anemic recovery in aggregate investment.
Author: Alexander Chudik Publisher: Emerald Group Publishing ISBN: 1802620656 Category : Business & Economics Languages : en Pages : 376
Book Description
The collection of chapters in Volume 43 Part B of Advances in Econometrics serves as a tribute to one of the most innovative, influential, and productive econometricians of his generation, Professor M. Hashem Pesaran.
Author: Tatsuro Senga
Author: Tatsuro Senga
Author: Julieta Caunedo
Author: Eran Alan Guse
Author: Francesc Obiols Homs
Author: Glenn Magerman
Author: By Kai Yan
Author: Alexander Hempfing
Author: Guanliang Hu
Author: Christian D. Bustamante Amaya
Author: Alexander Chudik