Uncertainty Shocks and Firm Dynamics: Search and Monitoring in the Credit Market

Thomas Brand, Marlene Isore, Fabien Tripier

    Research output: Working 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 costly-state-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 PublicationParis
    PublisherCentre pour la recherche économique et ses application
    Number of pages55
    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. (CEPREMAP working papers; Vol. 1707). Paris: Centre pour la recherche économique et ses application.