Data and Code for "Reassessing the Relevance of Financial Shocks in an Estimated Heterogeneous Firm Model"
Principal Investigator(s): View help for Principal Investigator(s) Xing Guo, Bank of Canada
Version: View help for Version V1
| Name | File Type | Size | Last Modified |
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| Empirics | 12/28/2023 07:50:PM | ||
| Model | 12/28/2023 03:19:PM | ||
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text/html | 33.1 KB | 12/28/2023 03:46:PM |
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text/x-web-markdown | 19.9 KB | 12/28/2023 10:01:AM |
Project Citation:
Guo, Xing. Data and Code for “Reassessing the Relevance of Financial Shocks in an Estimated Heterogeneous Firm Model.” Nashville, TN: American Economic Association [publisher], 2024. Ann Arbor, MI: Inter-university Consortium for Political and Social Research [distributor], 2024-07-01. https://doi.org/10.3886/E191747V1
Project Description
Summary:
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I study the transmission of financial shocks using an estimated heterogeneous firm model. Following a contractionary financial shock, financially constrained firms cut investment, but unconstrained firms increase investment due to the lower capital price and interest rate. After matching the empirical dynamics of prices and the price elasticity of investment, I find a limited role of the unconstrained firms’ response in dampening the aggregate investment decline. Non-financial capital adjustment friction is the key to generating this result. Without the capital adjustment friction, unconstrained firms’ investment becomes unrealistically sensitive to prices, and the model would understate the financial shocks’ aggregate relevance.
Scope of Project
Subject Terms:
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Macroeconomics;
Corporate finance;
investment
JEL Classification:
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E12 General Aggregative Models: Keynes; Keynesian; Post-Keynesian; Modern Monetary Theory
E22 Investment; Capital; Intangible Capital; Capacity
G31 Capital Budgeting; Fixed Investment and Inventory Studies; Capacity
G32 Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
E12 General Aggregative Models: Keynes; Keynesian; Post-Keynesian; Modern Monetary Theory
E22 Investment; Capital; Intangible Capital; Capacity
G31 Capital Budgeting; Fixed Investment and Inventory Studies; Capacity
G32 Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
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