Financial frictions, asset prices, and the Great Recession
Huo, Zhen
Ríos Rull, José Víctor

Date: 2018
Abstract: We study financial shocks to households' ability to borrow in an economy that quantitatively replicates U. S. earnings, financial, and housing wealth distributions and the main macro aggregates. Such shocks generate large recessions via the negative wealth effect associated with the large drop in house prices triggered by the reduced access to credit of a large number of households. The model incorporates additional margins that are crucial for a large recession to occur: that it is difficult to reallocate production from consumption to investment or net exports, and that the reductions in consumption contribute to reductions in measured TFP.
Abstract: The ADEMU Working Paper Series is being supported by the European Commission Horizon 2020 European Union funding for Research & Innovation, grant agreement No 649396.
Note: Número d'acord de subvenció EC/H2020/649396
Rights: Aquest document està subjecte a una llicència d'ús Creative Commons. Es permet la reproducció total o parcial, la distribució, la comunicació pública de l'obra i la creació d'obres derivades, fins i tot amb finalitats comercials, sempre i quan es reconegui l'autoria de l'obra original. Creative Commons
Language: Anglès.
Series: Barcelona Graduate School of Economics: ADEMU working paper series
Series: ADEMU Working Paper Series ; 110
Document: workingPaper
Subject: Balance sheet recession ; Asset price ; Goods market frictions ; Labour market frictions

Adreça alternativa: https://hdl.handle.net/10230/35497


56 p, 854.8 KB

The record appears in these collections:
Research literature > Working papers

 Record created 2018-10-23, last modified 2019-07-21



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