Financial frictions on capital allocation: A transmission mechanism of TFP fluctuations
This paper provides a theory of financial frictions as a transmission mechanism for news shocks to drive aggregate TFP fluctuations. We show that in an economy calibrated to U.S. data, variations in financial frictions on capital allocation in response to news about future technology can generate ag...
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| Veröffentlicht in: | Journal of monetary economics 2013-09, Vol.60 (6), p.683-703 |
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| container_title | Journal of monetary economics |
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| creator | Chen, Kaiji Song, Zheng |
| description | This paper provides a theory of financial frictions as a transmission mechanism for news shocks to drive aggregate TFP fluctuations. We show that in an economy calibrated to U.S. data, variations in financial frictions on capital allocation in response to news about future technology can generate aggregate TFP fluctuations and, thus, trigger business cycles before the actual technological change is realized. Using the COMPUSTAT dataset, we find that the relative capital productivity of financially constrained to unconstrained firms is highly countercyclical. Moreover, our VAR analysis shows that news shocks can account for a substantial fraction of the relative capital productivity fluctuations over business cycle frequencies.
•We provide a theory of financial frictions as a transmission mechanism for primitive shocks to translate into aggregate TFP fluctuations.•Variations in financial frictions in response to news about future technology can generate aggregate TFP and business cycles fluctuations.•The relative capital productivity of financially constrained to unconstrained firms in the COMPUSTAT dataset is highly countercyclical.•News shocks account for a substantial fraction of the relative capital productivity fluctuations over business cycle frequencies. |
| doi_str_mv | 10.1016/j.jmoneco.2013.06.001 |
| format | Article |
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•We provide a theory of financial frictions as a transmission mechanism for primitive shocks to translate into aggregate TFP fluctuations.•Variations in financial frictions in response to news about future technology can generate aggregate TFP and business cycles fluctuations.•The relative capital productivity of financially constrained to unconstrained firms in the COMPUSTAT dataset is highly countercyclical.•News shocks account for a substantial fraction of the relative capital productivity fluctuations over business cycle frequencies.</description><identifier>ISSN: 0304-3932</identifier><identifier>EISSN: 1873-1295</identifier><identifier>DOI: 10.1016/j.jmoneco.2013.06.001</identifier><identifier>CODEN: JMOEDW</identifier><language>eng</language><publisher>Amsterdam: Elsevier B.V</publisher><subject>Business cycles ; Capital Allocation ; Capital productivity ; Economic models ; Economic theory ; Financial Friction ; New technology ; News Shock ; Productivity ; Resource allocation ; Risk assessment ; Risk management ; Studies ; Technological change ; TFP Fluctuation ; Transmission mechanism ; U.S.A ; Vector-autoregressive models</subject><ispartof>Journal of monetary economics, 2013-09, Vol.60 (6), p.683-703</ispartof><rights>2013 Elsevier B.V.</rights><rights>Copyright Elsevier Sequoia S.A. Sep 2013</rights><lds50>peer_reviewed</lds50><oa>free_for_read</oa><woscitedreferencessubscribed>false</woscitedreferencessubscribed><citedby>FETCH-LOGICAL-c481t-e30643fef113e432bbd61cc619743e1d32683521181a7e5b252f8c290a7aca233</citedby><cites>FETCH-LOGICAL-c481t-e30643fef113e432bbd61cc619743e1d32683521181a7e5b252f8c290a7aca233</cites></display><links><openurl>$$Topenurl_article</openurl><openurlfulltext>$$Topenurlfull_article</openurlfulltext><thumbnail>$$Tsyndetics_thumb_exl</thumbnail><linktohtml>$$Uhttps://www.sciencedirect.com/science/article/pii/S0304393213000858$$EHTML$$P50$$Gelsevier$$H</linktohtml><link.rule.ids>314,776,780,3537,27901,27902,65306</link.rule.ids></links><search><creatorcontrib>Chen, Kaiji</creatorcontrib><creatorcontrib>Song, Zheng</creatorcontrib><title>Financial frictions on capital allocation: A transmission mechanism of TFP fluctuations</title><title>Journal of monetary economics</title><description>This paper provides a theory of financial frictions as a transmission mechanism for news shocks to drive aggregate TFP fluctuations. We show that in an economy calibrated to U.S. data, variations in financial frictions on capital allocation in response to news about future technology can generate aggregate TFP fluctuations and, thus, trigger business cycles before the actual technological change is realized. Using the COMPUSTAT dataset, we find that the relative capital productivity of financially constrained to unconstrained firms is highly countercyclical. Moreover, our VAR analysis shows that news shocks can account for a substantial fraction of the relative capital productivity fluctuations over business cycle frequencies.
•We provide a theory of financial frictions as a transmission mechanism for primitive shocks to translate into aggregate TFP fluctuations.•Variations in financial frictions in response to news about future technology can generate aggregate TFP and business cycles fluctuations.•The relative capital productivity of financially constrained to unconstrained firms in the COMPUSTAT dataset is highly countercyclical.•News shocks account for a substantial fraction of the relative capital productivity fluctuations over business cycle frequencies.</description><subject>Business cycles</subject><subject>Capital Allocation</subject><subject>Capital productivity</subject><subject>Economic models</subject><subject>Economic theory</subject><subject>Financial Friction</subject><subject>New technology</subject><subject>News Shock</subject><subject>Productivity</subject><subject>Resource allocation</subject><subject>Risk assessment</subject><subject>Risk management</subject><subject>Studies</subject><subject>Technological change</subject><subject>TFP Fluctuation</subject><subject>Transmission mechanism</subject><subject>U.S.A</subject><subject>Vector-autoregressive models</subject><issn>0304-3932</issn><issn>1873-1295</issn><fulltext>true</fulltext><rsrctype>article</rsrctype><creationdate>2013</creationdate><recordtype>article</recordtype><recordid>eNqFkEFLJDEQhYOs4Kz6E4TAXvbSbSrpznTvRUQcFQQ9KB5DpqYa03QnY9K94L8343jy4qmo4nuPV4-xMxAlCNDnfdmPwROGUgpQpdClEHDAFtAsVQGyrX-xhVCiKlSr5BH7nVIvMtEu9YK9rJy3Hp0deBcdTi74xIPnaLduykc7DAHt7vyPX_IpWp9Gl1Le-Uj4ar1LIw8df1o98m6YcZo_4XTCDjs7JDr9msfseXX9dHVb3D_c3F1d3hdYNTAVpISuVEcdgKJKyfV6owFR53CVItgoqRtVS4AG7JLqtaxl16BshV1atFKpY_Z377uN4W2mNJkcD2kYrKcwJwNVBY1oRQ0Z_fMN7cMcfU6XKSUbXctmZ1jvKYwhpUid2UY32vhuQJhd3aY3X3WbXd1GaJPLzLqLvY7yt_8dRZPQkUfauEg4mU1wPzh8AIAmip0</recordid><startdate>20130901</startdate><enddate>20130901</enddate><creator>Chen, Kaiji</creator><creator>Song, Zheng</creator><general>Elsevier B.V</general><general>Elsevier Sequoia S.A</general><scope>AAYXX</scope><scope>CITATION</scope><scope>8BJ</scope><scope>FQK</scope><scope>JBE</scope></search><sort><creationdate>20130901</creationdate><title>Financial frictions on capital allocation: A transmission mechanism of TFP fluctuations</title><author>Chen, Kaiji ; Song, Zheng</author></sort><facets><frbrtype>5</frbrtype><frbrgroupid>cdi_FETCH-LOGICAL-c481t-e30643fef113e432bbd61cc619743e1d32683521181a7e5b252f8c290a7aca233</frbrgroupid><rsrctype>articles</rsrctype><prefilter>articles</prefilter><language>eng</language><creationdate>2013</creationdate><topic>Business cycles</topic><topic>Capital Allocation</topic><topic>Capital productivity</topic><topic>Economic models</topic><topic>Economic theory</topic><topic>Financial Friction</topic><topic>New technology</topic><topic>News Shock</topic><topic>Productivity</topic><topic>Resource allocation</topic><topic>Risk assessment</topic><topic>Risk management</topic><topic>Studies</topic><topic>Technological change</topic><topic>TFP Fluctuation</topic><topic>Transmission mechanism</topic><topic>U.S.A</topic><topic>Vector-autoregressive models</topic><toplevel>peer_reviewed</toplevel><toplevel>online_resources</toplevel><creatorcontrib>Chen, Kaiji</creatorcontrib><creatorcontrib>Song, Zheng</creatorcontrib><collection>CrossRef</collection><collection>International Bibliography of the Social Sciences (IBSS)</collection><collection>International Bibliography of the Social Sciences</collection><collection>International Bibliography of the Social Sciences</collection><jtitle>Journal of monetary economics</jtitle></facets><delivery><delcategory>Remote Search Resource</delcategory><fulltext>fulltext</fulltext></delivery><addata><au>Chen, Kaiji</au><au>Song, Zheng</au><format>journal</format><genre>article</genre><ristype>JOUR</ristype><atitle>Financial frictions on capital allocation: A transmission mechanism of TFP fluctuations</atitle><jtitle>Journal of monetary economics</jtitle><date>2013-09-01</date><risdate>2013</risdate><volume>60</volume><issue>6</issue><spage>683</spage><epage>703</epage><pages>683-703</pages><issn>0304-3932</issn><eissn>1873-1295</eissn><coden>JMOEDW</coden><abstract>This paper provides a theory of financial frictions as a transmission mechanism for news shocks to drive aggregate TFP fluctuations. We show that in an economy calibrated to U.S. data, variations in financial frictions on capital allocation in response to news about future technology can generate aggregate TFP fluctuations and, thus, trigger business cycles before the actual technological change is realized. Using the COMPUSTAT dataset, we find that the relative capital productivity of financially constrained to unconstrained firms is highly countercyclical. Moreover, our VAR analysis shows that news shocks can account for a substantial fraction of the relative capital productivity fluctuations over business cycle frequencies.
•We provide a theory of financial frictions as a transmission mechanism for primitive shocks to translate into aggregate TFP fluctuations.•Variations in financial frictions in response to news about future technology can generate aggregate TFP and business cycles fluctuations.•The relative capital productivity of financially constrained to unconstrained firms in the COMPUSTAT dataset is highly countercyclical.•News shocks account for a substantial fraction of the relative capital productivity fluctuations over business cycle frequencies.</abstract><cop>Amsterdam</cop><pub>Elsevier B.V</pub><doi>10.1016/j.jmoneco.2013.06.001</doi><tpages>21</tpages><oa>free_for_read</oa></addata></record> |
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| ispartof | Journal of monetary economics, 2013-09, Vol.60 (6), p.683-703 |
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| language | eng |
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| source | Elsevier ScienceDirect Journals |
| subjects | Business cycles Capital Allocation Capital productivity Economic models Economic theory Financial Friction New technology News Shock Productivity Resource allocation Risk assessment Risk management Studies Technological change TFP Fluctuation Transmission mechanism U.S.A Vector-autoregressive models |
| title | Financial frictions on capital allocation: A transmission mechanism of TFP fluctuations |
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