Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/50566
Authors: 
Cantore, Cristiano
Satchi, Mathan
Year of Publication: 
2009
Series/Report no.: 
School of Economics discussion papers 09,04
Abstract: 
The link between aggregate profits and investment has been widely analysed through the impact of profits on net worth and therefore the firm's ability to borrow, in the presence of credit market imperfections. How the business cycle is affected if profits also affect investment through an impact on savings and therefore the intermediary's ability to lend, is the topic of this paper. We find that the fluctuations in the supply of credit that result from this may significantly amplify output responses to shocks in comparison to a situation where the net worth mechanism operates alone.
Subjects: 
business cycles
credit market imperfections
loan supply
JEL: 
E32
E44
E51
Document Type: 
Working Paper

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