Fewer But Better: Sudden Stops, Firm Entry, and Financial Selection

Ates, Sina T.; Saffie, Felipe

doi:10.2139/ssrn.2529000

Cited by 15 publications

(17 citation statements)

References 47 publications

(37 reference statements)

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“…Finally, we borrow ideas from the unified treatment of business cycles and long‐term dynamics in Comin and Gertler (), Comin, Gertler, and Santacreu (), Gornemann (), Kung and Schmid (), and Ates and Saffie (). Relative to Comin and Gertler's pioneering work, we modify the households' side so that we can discuss financial frictions as well as feedback from the medium‐frequency components to the high‐frequency components.…”

Section: Introductionmentioning

confidence: 99%

Financial frictions, trends, and the great recession

Guerrón‐Quintana¹,

Jinnai

2019

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We study the causes behind the shift in the level of U.S. GDP following the Great Recession. To this end, we propose a model featuring endogenous productivity à la Romer and a financial friction à la Kiyotaki-Moore. Adverse financial disturbances during the recession and the lack of strong tailwinds post-crisis resulted in a severe contraction and the downward shift in the economy's trend. Had financial conditions remained stable during the crisis, the economy would have grown at its average growth rate. From a historical perspective, the Great Recession was unique because of the size and persistence of adverse shocks, and the lackluster performance of favorable shocks since 2010. for valuable discussions and seminar participants at several institutions and conferences for comments. Ryo Jinnai gratefully acknowledges the support by JSPS KAKENHI grants (16K17080, 16H03626, and 17H00985) as well as the Hitotsubashi Institute for Advanced Study (HIAS).1 More formally, the shift in the GDP trend is detected by the flexible estimation of trends with regime shifts recently advanced by Eo and Kim (2012). We thank Yunjong Eo for helping with the estimation using their approach. 2 The forecast is built assuming that the economy will be growing at the average growth rate for the period 2009.Q2-2015.Q1.

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Section: Introductionmentioning

confidence: 99%

Financial frictions, trends, and the great recession

Guerrón‐Quintana¹,

Jinnai

2019

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“…Therefore, our paper belongs to the recent literature that uses dynamic heterogeneous-firms models and/or firm-level information to study classical problems in international economics such as the transmission of business cycles [Ghironi and Melitz, 2005], the consequences of financial integration [Gopinath et al, 2015, Varela, 2015, the response of trade flows to devaluations [Alessandria et al, 2013], sudden stops [Ates and Saffie, 2016], and to measure news shock arising from commodity discoveries [Arezki et al, 2017]. In addition, recent models of commodity price transmission conceptualize these shocks as endowment changes to the economy, mainly highlighting the wealth channel [e.g., Fernández et al, 2017a].…”

Section: Introductionmentioning

confidence: 99%

The Transmission of Commodity Price Super-Cycles

Benguria¹,

Saffie²,

Urzúa³

2018

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We thank the Brazilian Labor Ministry (MTE) for data access. We recognize excellent research assistance by Camila Galindo, Karam Jo and Rodrigo Heresi. All mistakes are our own. The views expressed herein are those of the authors and do not necessarily reflect the views of the National Bureau of Economic Research. NBER working papers are circulated for discussion and comment purposes. They have not been peer-reviewed or been subject to the review by the NBER Board of Directors that accompanies official NBER publications.

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“…Closer to our paper Ates and Saffie [2016] bridge a version of the Schumpeterian growth model of Klette and Kortum [2004] and the business cycle model of Neumeyer and Perri [2005] and Uribe and Yue [2006] to show that sudden stops have a persistent effect on growth through the composition of entering firms. Matsumoto [2018] extends Ates and Saffie [2016] allowing for an occosinally binding constraint to study the interplay of FDI and reserve accumulation in emerging countries. A key contribution of our model to this literature is incorporating trade dynamics, which are essential to the understanding of sudden stops in emerging markets.…”

Section: Contribution To the Existing Literaturementioning

confidence: 96%

Productivity and Trade Dynamics in Sudden Stops

2020

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This paper studies productivity and trade dynamics during sudden stop episodes. Sudden stops of capital inflows to emerging economies are characterized by deep recessions, slow recoveries, sharp devaluations, and reversals in the trade balance. We develop a framework to capture these salient features of sudden stops. The model features endogenous productivity and trade dynamics, and endogenous sudden stops. In this environment, firm and product entry and exit into domestic and export markets play a key role in shaping the dynamic response of the economy to a sudden stop. We discipline the model using unique firm-product level data in both domestic and export markets from a census of manufacturing firms in an emerging economy. The calibrated model matches the key stylized facts of sudden stops and their aftermath. In addition, we show that the models' predictions are consistent with the dynamics of firms' product portfolios during the Chilean sudden stop of 1998.

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Fewer But Better: Sudden Stops, Firm Entry, and Financial Selection

Cited by 15 publications

References 47 publications

Financial frictions, trends, and the great recession

Financial frictions, trends, and the great recession

The Transmission of Commodity Price Super-Cycles

Productivity and Trade Dynamics in Sudden Stops

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