Data and Code for: Earnings-Based Borrowing Constraints and Macroeconomic Fluctuations

Principal Investigator(s): View help for Principal Investigator(s) Thomas Drechsel, University of Maryland

Name	File Type	Size	Last Modified
Section I			05/26/2022 11:12:AM
Section II			05/26/2022 11:12:AM
Section III			05/26/2022 11:12:AM
Section IV			07/06/2022 11:44:AM
Readme.txt	text/plain	10.1 KB	07/06/2022 11:38:AM

Project Citation:

Drechsel, Thomas. Data and Code for: Earnings-Based Borrowing Constraints and Macroeconomic Fluctuations. Nashville, TN: American Economic Association [publisher], 2023. Ann Arbor, MI: Inter-university Consortium for Political and Social Research [distributor], 2023-03-27. https://doi.org/10.3886/E167862V1

Project Description

Summary: This is the replication package for: "Earnings-Based Borrowing Constraints and Macroeconomic Fluctuations"

Abstract of the paper:

Microeconomic evidence reveals a direct link between firms’ current earnings and their access to debt. This paper studies macroeconomic implications of earnings-based borrowing constraints. In a macro model, firms with earnings-based constraints borrow more in response to positive investment shocks, whereas firms with collateral constraints borrow less. Empirically, aggregate and firm-level credit responds to identified investment shocks according to the predictions with earnings-based constraints. Moreover, with sticky prices earnings-based constraints imply that supply shocks are quantitatively more important. This is validated in an estimated version of the model, highlighting the importance of carefully modeling credit constraints to understand policy tradeoffs.

Scope of Project

Subject Terms: Collateral constraints; Loan covenants; Cash flow-based lending; Financial frictions; Investment-specific shocks; Sticky prices

JEL Classification:
      E22 Investment; Capital; Intangible Capital; Capacity
      E32 Business Fluctuations; Cycles
      E44 Financial Markets and the Macroeconomy
      G32 Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill

Geographic Coverage: United States

Time Period(s): 1952 – 2017

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Published Versions

V1 [2023-03-27]

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DDI 2.5

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