Published in:FRB of New York Staff Report ; No. 904, November 2019
Extent:
1 Online-Ressource (45 p)
Language:
English
DOI:
10.2139/ssrn.3493310
Identifier:
Origination:
Footnote:
Nach Informationen von SSRN wurde die ursprüngliche Fassung des Dokuments November 2019 erstellt
Description:
Can the macroeconomic effects of credit supply shocks be large even when a small share of firms are credit-constrained? I use U.K. firm-level accounting data to discipline a heterogeneous-firm model in which the interaction between real and financial frictions induces precautionary cash holdings. In the data, firms increased their cash ratios during the last recession, and cash-intensive firms displayed higher employment growth. A tightening of firms' credit conditions generates the same dynamics in the model. Unconstrained firms pre-emptively respond to credit supply shocks, and this precautionary channel crucially matters for the aggregate dynamics and the model fit with microeconomic data