The Asymmetric Effects of Financial Frictions
Economic variables move asymmetrically over the business cycle: quickly during crises but slowly during recoveries. I show that this asymmetry is stronger in countries with less developed financial systems and greater financial frictions. Then I explain this fact using a learning model with endogeno...
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| Veröffentlicht in: | The Journal of political economy 2013-10, Vol.121 (5), p.844-895 |
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| container_end_page | 895 |
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| container_issue | 5 |
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| container_title | The Journal of political economy |
| container_volume | 121 |
| creator | Ordoñez, Guillermo |
| description | Economic variables move asymmetrically over the business cycle: quickly during crises but slowly during recoveries. I show that this asymmetry is stronger in countries with less developed financial systems and greater financial frictions. Then I explain this fact using a learning model with endogenous information about economic conditions. Financial frictions, which I capture by higher bankruptcy costs, magnify the reaction of lending rates and economic activity to negative shocks and then delay their recovery by restricting information after the crisis. Empirical evidence and a quantitative exploration of the model show that this explanation is consistent with the data. |
| doi_str_mv | 10.1086/673886 |
| format | Article |
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I show that this asymmetry is stronger in countries with less developed financial systems and greater financial frictions. Then I explain this fact using a learning model with endogenous information about economic conditions. Financial frictions, which I capture by higher bankruptcy costs, magnify the reaction of lending rates and economic activity to negative shocks and then delay their recovery by restricting information after the crisis. Empirical evidence and a quantitative exploration of the model show that this explanation is consistent with the data.</description><identifier>ISSN: 0022-3808</identifier><identifier>EISSN: 1537-534X</identifier><identifier>DOI: 10.1086/673886</identifier><identifier>CODEN: JLPEAR</identifier><language>eng</language><publisher>Chicago: University of Chicago Press</publisher><subject>Bankruptcy ; Capital investments ; Corporate finance ; Economic activity ; Economic conditions ; Economic costs ; Economic models ; Economic theory ; Entrepreneurs ; Financial investments ; Information science ; Investment rates ; Lenders ; Loans ; Political economy ; Skewed distribution ; Studies</subject><ispartof>The Journal of political economy, 2013-10, Vol.121 (5), p.844-895</ispartof><rights>2013 by The University of Chicago. 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I show that this asymmetry is stronger in countries with less developed financial systems and greater financial frictions. Then I explain this fact using a learning model with endogenous information about economic conditions. Financial frictions, which I capture by higher bankruptcy costs, magnify the reaction of lending rates and economic activity to negative shocks and then delay their recovery by restricting information after the crisis. 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| ispartof | The Journal of political economy, 2013-10, Vol.121 (5), p.844-895 |
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| language | eng |
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| source | Business Source Complete; JSTOR Archive Collection A-Z Listing; University of Chicago Press Journals (Full run) |
| subjects | Bankruptcy Capital investments Corporate finance Economic activity Economic conditions Economic costs Economic models Economic theory Entrepreneurs Financial investments Information science Investment rates Lenders Loans Political economy Skewed distribution Studies |
| title | The Asymmetric Effects of Financial Frictions |
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