Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/154192
Authors: 
De Fiore, Fiorella
Uhlig, Harald
Year of Publication: 
2015
Series/Report no.: 
ECB Working Paper 1759
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 2008-09, namely the observed shift from bank finance to bond finance, at a time when the cost of market debt rose above the cost of bank loans. We show that the flexibility offered by banks on the terms of their loans and firms’ ability to substitute among alternative instruments of debt finance are important to shield the economy from adverse real effects of a financial crisis.
Subjects: 
corporate debt
financial crisis
firms heterogeneity
risk shocks
JEL: 
E32
E44
C68
G23
ISBN: 
978-92-899-1499-4
Document Type: 
Working Paper

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