Growth, slowdowns, and recoveries

Bianchi, F, Kung, H and Morales, G (2019) Growth, slowdowns, and recoveries. Journal of Monetary Economics, 101. pp. 47-63. ISSN 0304-3932

Abstract

We construct and estimate an endogenous growth model with debt and equity financing frictions to understand the relation between business cycle fluctuations and long-term growth. The presence of spillover effects from R&D imply an endogenous relation between productivity growth and the state of the economy. A large contractionary shock to equity financing in the 2001 recession led to a persistent growth slowdown that was more severe than in the 2008 recession. Equity (debt) financing shocks are more important for explaining R&D (physical) investment. Therefore, these two financing shocks affect the economy over different horizons.

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Item Type: Article
Subject Areas: Finance
Subjects: B > Business cycles
Date Deposited: 23 Nov 2018 17:14
Last Modified: 02 Sep 2019 15:35
URI: http://lbsresearch.london.edu/id/eprint/994
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