Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/39643
Authors: 
von Hagen, Jürgen
Zhang, Haiping
Year of Publication: 
2006
Series/Report no.: 
ZEI working paper B 03-2006
Abstract: 
We address an important business cycle fact, i.e., the amplified and hump-shaped responses of output to productivity shocks, in a dynamic general equilibrium model with financial frictions. Models with financial frictions in the current literature have either the amplification mechanism or the propagation mechanism. Our model shows that the dynamic interaction of borrowing constraints, endogenous capital accumulation and capital reallocation among agents with different productivity constitutes a mechanism through which the effects of productivity shock on aggregate output are amplified and propagated, more in line with the empirical evidence than other related models in the literature.
Subjects: 
Amplification
Business cycles
Capital reallocation
Financial frictions
Propagation
JEL: 
E32
E44
G3
Document Type: 
Working Paper

Files in This Item:
File
Size
231.44 kB





Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.