CHAINED CREDIT CONTRACTS AND FINANCIAL ACCELERATORS

Naohisa Hirakata, Nao Sudo, Kozo Ueda

Research output: Contribution to journalArticle

2 Citations (Scopus)

Abstract

Sufficiently high net worth of financial intermediaries (FIs) is considered a necessary condition for financial and macroeconomic stability. In this paper, we explore why the net worth of FIs is important as compared to that of nonfinancial firms using a dynamic general equilibrium model, in which both FIs and nonfinancial firms rely on costly external debt. We find that an exogenous disruption of the FIs' net worth has a greater aggregate impact than does the same-sized disruption of the nonfinancial firms' net worth. The key reason is that the net worth of the FIs in the United States is small. (JEL E22, E44, G21).

Original languageEnglish
Pages (from-to)565-579
Number of pages15
JournalEconomic Inquiry
Volume55
Issue number1
DOIs
Publication statusPublished - 2017 Jan 1

ASJC Scopus subject areas

  • Business, Management and Accounting(all)
  • Economics and Econometrics

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