A version of the Kiyotaki and Moore (1997) model of credit cycles is used to examine the extent to which a crisis in a country can spread to another seemingly unrelated country. The model features two small open economies that face credit constraints and produce a differentiated commodity which...

This paper shows that liquidity constraints restrict job creation even when labor markets are flexible. In a dynamic model of labor demand, I show that in an environment of imperfect capital and imperfect labor markets, firms use temporary contracts to relax financial constraints. Evidence for...

Based on an analysis of high-frequency panel data for U.S. firms, this paper finds that inventory investment has been liquidity-constrained in most periods during 1975-97, but less so, or not at all, during recessions. This result can be justified on the grounds that inventory fluctuations are...

It is widely assumed that pervasive credit market failures mean that a person's current wealth is critical to whether or not that person can take up opportunities to start a new business. The authors show that inequality in wealth can be either good or bad for the level of entrepreneurship in an...

The author examines whether output contraction associated with cyclical output fluctuations and economic crises have an asymmetric effect on poverty. He identifies four potential sources of asymmetry: expectations and cofident factors, credit rationing at the firm level (induced by either...

The purpose of the paper is to examine what kind of investment theory can explain the recent movements in corporate investment in Japan. To explain the drastic decline in corporate investment in the wake of the bubble economy, economists applied Tobin's Q theory with liquidity constraints or...

If a non-financial firm does not do well in a financial crisis, it could be due to either a contraction of demand for its output or a contraction of supply of external finance. We propose a framework to assess the relative importance of the two shocks, making use of a measure of a firm's...

This paper studies the impact of cross-country variation in financial market development on firms' financing choices and growth rates using comprehensive firm-level datasets. We document that in less financially developed economies, small firms grow faster and have lower debt to asset ratios...

Italy is characterized by strong differencesboth in the productive and in the financial structure. Small and medium firmstend to concentrate in the so called 'Marshallian industrial district', whoseproductive system has been thoroughly studied but whose financial features arepartially...