We study dynamic general equilibrium in a Lucas economy with two trees, one consumption good, two CRRA investors with heterogeneous risk aversions, and portfolio constraints. We focus on margin and leverage constraints, which restrict access to credit markets. We find positive relationship...

We evaluate the impact of increased income uncertainty and financial liberalization in the US on consumption volatility and household welfare. We estimate Euler equations and measure the volatility of unpredictable changes in consumption as the squared Euler equation residuals. We directly...

We develop a heterogeneous-firms model with trade in goods, labor mobility and credit constraints due to moral hazard. Mitigating financial frictions reduces the incentive of high-skilled workers to migrate to one region such that an unequal distribution of industrial activity becomes less...

This paper suggests that a model in which firms face credit constrains on hiring labor can explain both the behavior of the labor wedge and the “jobless recoveries” phenomenon of the last three recessions. Using the corporate credit spread as a measure of firms' credit conditions, I show...

Banks have been heavily involved in securitization. We study whether the involvedness of a firm's main bank into different types of securitization activity – asset backed securities (ABS) and covered bonds – influences credit supply before and during the 2007-8 financial crisis. Both types...

The primary goal sought by the Bank of International Settlements (BIS) and its committee on Banking Supervision (BCBS) is to make banks safer entities and maintain a "level playing field" between them. However, the question of whether this objective can be attained through enforcing capital...

We examine a novel but economically important characterization of trade credit relationships in which large investment-grade buyers borrow from their substantially smaller, often credit- constrained, suppliers. Using variation in large retailers' aggregate cash management policies as a shock to...

This paper studies loan activity in a context where banks must follow Basel Accord-type rules and acquire financing from households. Loan activity typically decreases when entrepreneurs' investment returns decline, and we study which type of policy could revigorate an economy in a trough. We...

During the recent financial crisis, euro area firms, and especially Small and Medium-sized Enterprises, have been reporting acute problems of access to external finance. Using firm-level replies to the SME survey on access to finance, we use two indicators of financing constraints based on...

We use a unique dataset to estimate the impact of a large credit supply shock on employment in Spain. We exploit marked differences in banks' health at the onset of the Great Recession. Several weak banks were rescued by the State and they reduced credit more than other banks. We compare...