Artikel
Lizenziert
Nicht lizenziert
Erfordert eine Authentifizierung
On Balance Sheets, Idiosyncratic Risk and Aggregate Volatility
-
Luis San Vicente Portes
Veröffentlicht/Copyright:
27. Februar 2009
Since the mid-1980s firm level financial volatility has increased, while the U.S. economy has experienced a sharp decline in the volatility of GDP growth. Do firms adjust their capital structure in response to higher idiosyncratic risk? And if so, could that affect the performance of the aggregate economy? Using a dynamic general equilibrium model we show that in the presence of larger firm-specific risk, firms shift the composition of their balance sheets towards more self-financing and away from debt. In the presence of financial accelerator-like frictions, larger idiosyncratic risk translates into greater external financing costs, steering firms to borrow less to counteract larger premia. Model simulations suggest that larger idiosyncratic risk dampens the financial accelerator and can lead to a reduction in output volatility of up to 40 percent; and up to a 16 percent decline in firm leverage.
Published Online: 2009-2-27
©2011 Walter de Gruyter GmbH & Co. KG, Berlin/Boston
Sie haben derzeit keinen Zugang zu diesem Inhalt.
Sie haben derzeit keinen Zugang zu diesem Inhalt.
Artikel in diesem Heft
- Contributions Article
- Monetary Policy and Central Bank Balance Sheet Concerns
- The Transmission of Foreign Interest Rate Shocks to a Small-Open Economy: The Role of External Debt and Financial Integration
- Money and Barter under Private Information
- The Cost of Cyclical Mortality
- Interest Rate Conundrum
- Competitive Search Equilibrium with Private Information on Monetary Shocks
- Rational Inattention and Aggregate Fluctuations
- Optimal Monetary Policy in a Financially Fragile Economy
- Settlement Systems
- A Model of Sequential City Growth
- A Neoclassical Analysis of the Postwar Japanese Economy
- Empirics of Strategic Interdependence: The Case of the Racial Tipping Point
- Does Model Uncertainty Justify Conservatism? Robustness and the Delegation of Monetary Policy
- Can Financial Frictions Help Explain the Performance of the U.S. Fed?
- To Work or Not to Work: Did Tax Reforms Affect Labor Force Participation of Married Couples?
- Foreign Aid, Donor Fragmentation, and Economic Growth
- The Response of Household Expenditure to Anticipated Income Changes: Bonus Payments and the Seasonality of Consumption in Japan
- Of Nutters and Doves
- Topics Article
- Fiscal Shocks and Real Rigidities
- On Balance Sheets, Idiosyncratic Risk and Aggregate Volatility
- Endogenous Liquidity and Currency Unions
- Oil Matters: Real Input Prices and U.S. Unemployment Revisited
- Financial Development and Pay-As-You-Go Social Security
- Inflation Range Targets with Hard Edges
- Model Misspecification, Learning and the Exchange Rate Disconnect Puzzle
- Estimates of the Marginal Product of Capital, 1970-2000
- Examining Sectoral Co-Movement in Estimated Nominal Rigidities Models
- The Burden Sharing of Pollution Abatement Costs in Multi-Regional Open Economies
- Optimal Monetary Policy with a Convex Phillips Curve
- Cointegration and Asymmetric Adjustment: Some New Evidence Concerning the Behavior of the U.S. Current Account
- Risk-Adjusted Forecasts of Oil Prices
- Evaluating Communication Strategies for Public Agencies: Transparency, Opacity, and Secrecy
- The Source of UK Historical Economic Fluctuations: An Analysis Using Long-Run Restrictions
- Inflation Bias with Dynamic Phillips Curves and Impatient Policy Makers
- Regime Switches in GDP Growth and Volatility: Some International Evidence and Implications for Modeling Business Cycles
- What Drives Personal Consumption? The Role of Housing and Financial Wealth
- Dynamic Optimal Taxation with Human Capital
- Unemployment and Productivity, Slowdowns and Speed-Ups: Evidence Using Common Shifts
- Unions, Wage Setting and Monetary Policy Uncertainty
- Taxing Overtime or Subsidizing Employment
- Transitional Dynamics in the Solow-Swan Growth Model with AK Technology and Logistic Population Change
- Inflation Targeting: A Framework for Communication
- Advances Article
- Total Factor Productivity and Labor Reallocation: The Case of the Korean 1997 Crisis
- Inferential Expectations
Artikel in diesem Heft
- Contributions Article
- Monetary Policy and Central Bank Balance Sheet Concerns
- The Transmission of Foreign Interest Rate Shocks to a Small-Open Economy: The Role of External Debt and Financial Integration
- Money and Barter under Private Information
- The Cost of Cyclical Mortality
- Interest Rate Conundrum
- Competitive Search Equilibrium with Private Information on Monetary Shocks
- Rational Inattention and Aggregate Fluctuations
- Optimal Monetary Policy in a Financially Fragile Economy
- Settlement Systems
- A Model of Sequential City Growth
- A Neoclassical Analysis of the Postwar Japanese Economy
- Empirics of Strategic Interdependence: The Case of the Racial Tipping Point
- Does Model Uncertainty Justify Conservatism? Robustness and the Delegation of Monetary Policy
- Can Financial Frictions Help Explain the Performance of the U.S. Fed?
- To Work or Not to Work: Did Tax Reforms Affect Labor Force Participation of Married Couples?
- Foreign Aid, Donor Fragmentation, and Economic Growth
- The Response of Household Expenditure to Anticipated Income Changes: Bonus Payments and the Seasonality of Consumption in Japan
- Of Nutters and Doves
- Topics Article
- Fiscal Shocks and Real Rigidities
- On Balance Sheets, Idiosyncratic Risk and Aggregate Volatility
- Endogenous Liquidity and Currency Unions
- Oil Matters: Real Input Prices and U.S. Unemployment Revisited
- Financial Development and Pay-As-You-Go Social Security
- Inflation Range Targets with Hard Edges
- Model Misspecification, Learning and the Exchange Rate Disconnect Puzzle
- Estimates of the Marginal Product of Capital, 1970-2000
- Examining Sectoral Co-Movement in Estimated Nominal Rigidities Models
- The Burden Sharing of Pollution Abatement Costs in Multi-Regional Open Economies
- Optimal Monetary Policy with a Convex Phillips Curve
- Cointegration and Asymmetric Adjustment: Some New Evidence Concerning the Behavior of the U.S. Current Account
- Risk-Adjusted Forecasts of Oil Prices
- Evaluating Communication Strategies for Public Agencies: Transparency, Opacity, and Secrecy
- The Source of UK Historical Economic Fluctuations: An Analysis Using Long-Run Restrictions
- Inflation Bias with Dynamic Phillips Curves and Impatient Policy Makers
- Regime Switches in GDP Growth and Volatility: Some International Evidence and Implications for Modeling Business Cycles
- What Drives Personal Consumption? The Role of Housing and Financial Wealth
- Dynamic Optimal Taxation with Human Capital
- Unemployment and Productivity, Slowdowns and Speed-Ups: Evidence Using Common Shifts
- Unions, Wage Setting and Monetary Policy Uncertainty
- Taxing Overtime or Subsidizing Employment
- Transitional Dynamics in the Solow-Swan Growth Model with AK Technology and Logistic Population Change
- Inflation Targeting: A Framework for Communication
- Advances Article
- Total Factor Productivity and Labor Reallocation: The Case of the Korean 1997 Crisis
- Inferential Expectations
