A Model of Slow Recoveries from Financial Crises

51 Pages Posted: 13 Mar 2014

See all articles by Albert Queralto

Albert Queralto

Federal Reserve Board - Trade and Financial Studies Section

Date Written: December 2013

Abstract

This paper documents highly persistent effects of financial crises on output, labor productivity and employment in a sample of emerging economies. To address these facts, it introduces a quantitative macroeconomic model that includes endogenous TFP growth through firm creation. Firm creators obtain funding from a financial intermediation sector which is subject to frictions. These frictions become especially severe in a financial crisis, increasing the cost of credit for firm creators and thereby lowering the growth rate of aggregate TFP. As a consequence, the model produces medium-run dynamics following crises that are in line with the data.

Keywords: Business cycles, financial crises, total factor productivity

JEL Classification: E32, E44, F41, O33

Suggested Citation

Queralto, Albert, A Model of Slow Recoveries from Financial Crises (December 2013). FRB International Finance Discussion Paper No. 1097. Available at SSRN: https://ssrn.com/abstract=2407057 or http://dx.doi.org/10.2139/ssrn.2407057

Albert Queralto (Contact Author)

Federal Reserve Board - Trade and Financial Studies Section ( email )

20th St. and Constitution Ave.
Washington, DC 20551
United States

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