Finance as a Barrier to Entry: U.S. Bank Deregulation and Business Cycle

Stebunovs, Viktors

doi:10.2139/ssrn.1249822

Cited by 17 publications

(23 citation statements)

References 45 publications

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“…This specification also differentiates us from the recent firm entry literature, which has either not addressed the issue of how sunk costs are financed, or assumed financing by equity issues alone (Bergin and Corsetti, ; Bilbiie et al., ). Our result is also distinct from the few papers that do consider alternative means of entry financing, such as Stebunovs (), Karasoy (), Notz (), Casares and Poutineau (), Cacciatore et al . () and Uusküla (), in that we model firms with a choice between alternative means of financing, and the endogenous shift in this choice implies dynamics in key macro and financial variables that are more consistent with data…”

Section: Quantitative Analysiscontrasting

confidence: 96%

“… Our model is also distinct from the few papers that do model entry cost financing in the form of debt or bank lending, such as Stebunovs (), Karasoy (), Macnamara (), Notz (), Casares and Poutineau (), Cacciatore et al . () and Uusküla (), in that we model the endogenous choice that firms have between debt and equity financing rather than a fixed type of financing.…”

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confidence: 96%

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Firm Entry and Financial Shocks

Bergin

Feng²,

Lin

2017

The Economic Journal

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This article shows that firm entry dynamics are an important part of the propagation of financial shocks to the real macroeconomy. A VAR documents empirically that adverse financial shocks are associated with significant declines in both new firm creation and equity values. A DSGE business cycle model combining endogenous firm entry and financial frictions, where firms have a choice of financing entry through debt or equity, can explain these facts. The model implies that adjustment in firm numbers can moderate the impact of financial shocks on aggregate output, as it buffers the equity value and financial stance of surviving firms.

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Section: Quantitative Analysiscontrasting

confidence: 96%

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confidence: 96%

Firm Entry and Financial Shocks

Bergin

Feng²,

Lin

2017

The Economic Journal

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“…It follows that h 0 (z) = g 1 0 (z) for all z, and x I,0 = 0. As in previous studies, incumbents are assumed to suffer from a "death shock" at the end of each period with probability δ (Ghironi and Melitz, 2005, 2008. The mass of incumbents in period 1 leads to:…”

Section: Firm Dynamics and Heterogeneity In Technologymentioning

confidence: 99%

“…Stebunovs (2008) introduced endogenous entry into a DSGE model with banks, but he considered a situation in which banks' bargaining power is so strong that they can collect all the firms' profits without incurring auditing costs. Finally, I examine in what circumstances a "credit crunch" or "credit crisis" is most likely to occur.…”

Section: Introductionmentioning

confidence: 99%

Firm entry, credit availability and monetary policy

Kobayashi

2011

Journal of Economic Dynamics and Control

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This paper presents a dynamic general equilibrium model that incorporates firm entry under credit rationing. Goods-producing firms in this model are bank dependent in the sense that they have no choice but to borrow funds from banks to cover labor wages that must be paid in advance of production. The results show that a cut in the policy rate enhances firm entry by mitigating the severity of credit rationing. This policy transmission is different from the conventional balance-sheet channel in that a change in the policy rate directly affects borrowers' credit availability. I also show that a sudden stop in the credit supply to new firms is most likely to occur shortly after a credit boom. This is because endogenous downward wage rigidity prohibits the credit risk of prospective firms from decreasing enough to re-equilibrate the loan market.JEL Classification: E32, E44, E52

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“…Regarding the central hypothesis of imperfect banking competition, the closest models to ours are those by Aliaga-Díaz and Olivero (2006), Mandelman (2006) and Stebunovs (2008). In Aliaga-Díaz and Olivero market power arises from switching costs faced by costumers when trying to move from one bank to another.…”

Section: Introductionmentioning

confidence: 98%

Banking Competition, Housing Prices and Macroeconomic Stability

Andrés

Arce

2009

SSRN Journal

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We develop a dynamic general equilibrium model with an imperfectly competitive bank-loans market and collateral constraints that tie investors'credit capacity to the value of their real estate holdings. Banks set optimal lending rates taking into account the e¤ects of their price policies on their market share and on the volume of funds demanded by each customer. Lending margins have a signi…cant e¤ect on aggregate variables. Over the long run, fostering banking competition increases total consumption and output by triggering a reallocation of available collateral towards investors. However, as regards the short-run dynamics, most macroeconomic variables, including output, credit and housing prices, are more responsive on impact to exogenous shocks in an environment of highly competitive banks. The level of banking competition, through its e¤ects on endogenous lending margins, also a¤ects the degree of persistency of these variables. Speci…cally, stronger banking competition implies higher (lower) persistency after a monetary (credit-crunch) shock.

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Finance as a Barrier to Entry: U.S. Bank Deregulation and Business Cycle

Cited by 17 publications

References 45 publications

Firm Entry and Financial Shocks

Firm Entry and Financial Shocks

Firm entry, credit availability and monetary policy

Banking Competition, Housing Prices and Macroeconomic Stability

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