Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/157957
Authors: 
Finocchiaro, Daria
Mendicino, Caterina
Year of Publication: 
2015
Series/Report no.: 
Sveriges Riksbank Working Paper Series 314
Abstract: 
We show that in a model with equity and debt financing, the specfication of the borrowing constraint is crucial to generate empirically plausible responses of macro variables and asset prices to financial shocks. The interaction between financial frictions and labor demand, as in Jermann and Quadrini (2012), is key to the result. A collateral constraint a la Kiyotaki and Moore (1997) augmented with a working capital assumption generates similar results on impact.
Subjects: 
liquidity shocks
collateral constraints
stock prices
co-movement
JEL: 
E32
E44
Document Type: 
Working Paper

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