Financial Frictions and the Persistence of History: A Quantitative Exploration

Abstract

The authors gratefully acknowledge the support of the National Science Foundation under grant number SES-0820318. 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 peerreviewed or been subject to the review by the NBER Board of Directors that accompanies official NBER publications.

Partial differential equation models in macroeconomics

“…This has motivated the study of richer models of individual heterogeneity and wealth accumulation. Examples include models in which individuals have access to different returns to their savings [31,33], for instance because they run private enterprises in a world with imperfect capital markets [34][35][36], and models in which individuals have different preferences for current and future consumption [37]. A close interplay between numerical solutions of calibrated models and data is a central theme in the macroeconomic literature reviewed in this paper (and which we do not discuss in more detail due to space limitations).…”

Credit crunches and credit allocation in a model of entrepreneurship

“…The differential impact of credit frictions on businesses of different sizes has been shown to be useful in explaining a variety of phenomena, for instance firm-size distribution (Athreya and Akyol, 2009;Monge, 2009), firm dynamics (Albuquerque and Hopenhayn, 2004), macroeconomic fluctuations (Cooley et al, 2004;Jermann and Quadrini, 2012), and growth (Buera and Shin, 2013). More broadly, the interaction between frictions, entrepreneurship, and inequality is crucial to understanding the response to macroeconomic shocks (Jermann and Quadrini, 2007), the effect of certain government policies (Cagetti and De Nardi, 2009;Meh, 2005;Kitao, 2008), and asset pricing (Heaton and Lucas, 2000;Roussanov, 2010;Covas and Fujita, 2011).…”

Power laws in firm size and openness to trade: Measurement and implications

“…One of the reasons empirical power law estimates are important is that they are used to pin down crucial parameters in calibrated heterogeneous firm models (see, among many others, Helpman et al, 2004;Chaney, 2008;Buera and Shin, 2010;di Giovanni and Levchenko, 2010a). At the same time, quantitative results often depend very sharply on the precise parameter values that govern the distribution of firm size.…”