Published in:European Banking Center Discussion Paper Series ; No. 2014-004
Extent:
1 Online-Ressource (49 p)
Language:
English
DOI:
10.2139/ssrn.2488385
Identifier:
Origination:
Footnote:
Nach Informationen von SSRN wurde die ursprüngliche Fassung des Dokuments August 28, 2014 erstellt
Description:
The paper develops a dynamic general equilibrium model of financial markets and macroeconomy. In the model, long-term debt is extended to firms in a primary market and then traded in a secondary market among financiers. Two financial frictions that are ex-ante and ex-post with respect to the secondary market trading date raise the cost of debt finance. In stationary equilibrium, while ex-ante frictions are always counterproductive, financing costs that are ex-post could promote macroeconomic growth. I show that a model consistent with the U.S. financial development experience of the last 30 years is likely to exhibit declining ex-post frictions