A Model of Slow Recoveries from Financial Crises

46 Pages Posted: 30 May 2017

See all articles by Albert Queralto

Albert Queralto

Federal Reserve Board - Trade and Financial Studies Section

Date Written: 2013-12-18

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

Suggested Citation

Queralto, Albert, A Model of Slow Recoveries from Financial Crises (2013-12-18). FRB International Finance Discussion Paper No. 1097. Available at SSRN: https://ssrn.com/abstract=2976791

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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