Growth, Slowdowns, and Recoveries

38 Pages Posted: 8 Dec 2014 Last revised: 19 Aug 2022

See all articles by Francesco Bianchi

Francesco Bianchi

Johns Hopkins University; NBER; CEPR

Howard Kung

London Business School; Centre for Economic Policy Research (CEPR)

Gonzalo Morales

University of Alberta

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Date Written: December 2014


We construct and estimate an endogenous growth model with debt and equity financing frictions to understand the relation between business cycle fluctuations and long-term growth. The presence of spillover effects from R&D imply an endogenous relation between productivity growth and the state of the economy. A large contractionary shock to equity financing in the 2001 recession led to a persistent growth slowdown that was more severe than in the 2008 recession. Equity (debt) financing shocks are more important for explaining R&D (physical) investment. Therefore, these two financing shocks affect the economy over different horizons.

Suggested Citation

Bianchi, Francesco and Kung, Howard and Morales, Gonzalo, Growth, Slowdowns, and Recoveries (December 2014). NBER Working Paper No. w20725, Available at SSRN:

Francesco Bianchi (Contact Author)

Johns Hopkins University ( email )

Baltimore, MD 20036-1984
United States
14127156283 (Phone)

NBER ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
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CEPR ( email )

United Kingdom

Howard Kung

London Business School ( email )

Sussex Place
Regent's Park
London NW1 4SA
United Kingdom

Centre for Economic Policy Research (CEPR) ( email )

United Kingdom

Gonzalo Morales

University of Alberta ( email )

Edmonton, AB T6G 2R3

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