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Corporate Debt Structure and the Financial Crisis

Author

Listed:
  • Harald Uhlig

    (University of Chicago)

  • Fiorella De Fiore

    (European Central Bank)

Abstract

We present a DSGE model where firms optimally choose among alternative instruments of external finance. The model is used to explain the evolving composition of corporate debt during the financial crisis of 2007-09, namely the observed shift from bank finance to bond finance despite the increasing cost of debt securities relative to bank loans. We show that substitutability among instruments of external finance is important to shield the economy from the adverse effects of a financial crisis on investment and output

Suggested Citation

  • Harald Uhlig & Fiorella De Fiore, 2012. "Corporate Debt Structure and the Financial Crisis," 2012 Meeting Papers 429, Society for Economic Dynamics.
    • Handle: RePEc:red:sed012:429
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    References listed on IDEAS

    as
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    More about this item

    JEL classification:

    • E22 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Investment; Capital; Intangible Capital; Capacity
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • E5 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit

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