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Financial Market Frictions, Productivity Growth and Crises in Emerging Economies

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  • Albert Queralto

    (New York University)

Abstract

This paper documents that financial crises in emerging countries involve large and persistent losses in labor productivity. It then presents a model which features endogenous TFP growth through the adoption of new varieties of intermediates, and in which an agency problem in financial markets implies that technology adopters may be credit constrained. A crisis shock generates a decline in TFP of size and persistence comparable to the data. Financial frictions are quantitatively important, explaining half the medium run TFP decline. Both endogenous growth and the financial friction substantially contribute to a more persistent output decline and to an amplified short run response of consumption. These mechanisms also help in accounting for the time series properties of Argentina's GDP and Solow residual, especially at medium frequencies.

Suggested Citation

  • Albert Queralto, 2011. "Financial Market Frictions, Productivity Growth and Crises in Emerging Economies," 2011 Meeting Papers 697, Society for Economic Dynamics.
    • Handle: RePEc:red:sed011:697
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    Cited by:

    1. Jianjun Miao & Pengfei Wang, 2012. "Bubbles and Total Factor Productivity," American Economic Review, American Economic Association, vol. 102(3), pages 82-87, May.
    2. Rabitsch, Katrin & Stepanchuk, Serhiy & Tsyrennikov, Viktor, 2015. "International portfolios: A comparison of solution methods," Journal of International Economics, Elsevier, vol. 97(2), pages 404-422.
    3. Clain-Chamosset-Yvrard, Lise & Raurich, Xavier & Seegmuller, Thomas, 2024. "Entrepreneurship, growth and productivity with bubbles," Journal of Macroeconomics, Elsevier, vol. 81(C).
    4. Aikman, David & Nelson, Benjamin & Tanaka, Misa, 2015. "Reputation, risk-taking, and macroprudential policy," Journal of Banking & Finance, Elsevier, vol. 50(C), pages 428-439.
    5. Sheida Teimouri, 2015. "Currency crises and dynamics of real wages," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 151(2), pages 377-403, May.
    6. Wroński Marcin, 2019. "The productivity growth slowdown in advanced economies: causes and policy recommendations," International Journal of Management and Economics, Warsaw School of Economics, Collegium of World Economy, vol. 55(4), pages 391-406, December.

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