Uncertainty shocks and firm dynamics

Search and monitoring in the credit market

Thomas Brand, Marlene Isore, Fabien Tripier

    Research output: Working paperDiscussion paperScientific

    Abstract

    We develop a business cycle model with gross flows of firm creation and destruction.The credit market is characterized by two frictions. First,entrepreneurs undergo a costly search for intermediate funding to create a firm. Second, upon a match, a costlystate-verification contract is set up. When defaults occurs, banks monitor firms, seize their assets, and a fraction of financial relationships are severed. The model is estimated using Bayesian methods for the U.S. economy. Among other shocks, uncertainty in productivity turns out to be a major contributor to both macro-financial aggregates and firm dynamics.
    We develop a business cycle model with gross flows of firm creation and destruction.The credit market is characterized by two frictions. First,entrepreneurs undergo a costly search for intermediate funding to create a firm. Second, upon a match, a costlystate-verification contract is set up. When defaults occurs, banks monitor firms, seize their assets, and a fraction of financial relationships are severed. The model is estimated using Bayesian methods for the U.S. economy. Among other shocks, uncertainty in productivity turns out to be a major contributor to both macro-financial aggregates and firm dynamics.
    Original languageEnglish
    Place of PublicationHelsinki
    PublisherBank of Finland
    Number of pages55
    ISBN (Electronic)978-952-323-197-9
    Publication statusPublished - 2017
    MoE publication typeD4 Published development or research report or study

    Fields of Science

    • 511 Economics

    Cite this

    Brand, T., Isore, M., & Tripier, F. (2017). Uncertainty shocks and firm dynamics: Search and monitoring in the credit market. (Bank of Finland Research Discussions Papers; No. 34/2017). Helsinki: Bank of Finland.
    Brand, Thomas ; Isore, Marlene ; Tripier, Fabien. / Uncertainty shocks and firm dynamics : Search and monitoring in the credit market. Helsinki : Bank of Finland, 2017. (Bank of Finland Research Discussions Papers; 34/2017).
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    Brand, T, Isore, M & Tripier, F 2017 'Uncertainty shocks and firm dynamics: Search and monitoring in the credit market' Bank of Finland Research Discussions Papers, no. 34/2017, Bank of Finland, Helsinki.

    Uncertainty shocks and firm dynamics : Search and monitoring in the credit market. / Brand, Thomas; Isore, Marlene; Tripier, Fabien.

    Helsinki : Bank of Finland, 2017. (Bank of Finland Research Discussions Papers; No. 34/2017).

    Research output: Working paperDiscussion paperScientific

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    AB - We develop a business cycle model with gross flows of firm creation and destruction.The credit market is characterized by two frictions. First,entrepreneurs undergo a costly search for intermediate funding to create a firm. Second, upon a match, a costlystate-verification contract is set up. When defaults occurs, banks monitor firms, seize their assets, and a fraction of financial relationships are severed. The model is estimated using Bayesian methods for the U.S. economy. Among other shocks, uncertainty in productivity turns out to be a major contributor to both macro-financial aggregates and firm dynamics.

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    Brand T, Isore M, Tripier F. Uncertainty shocks and firm dynamics: Search and monitoring in the credit market. Helsinki: Bank of Finland. 2017. (Bank of Finland Research Discussions Papers; 34/2017).