Introducing both endogenous firm entry and a requirement for external finance in a general-equilibrium model leads to three main results. First, the financial constraint has contractionary effects on both equity investment and the labor supply as they are inversely related to the marginal...

This paper introduces both endogenous capital accumulation and deposit-in-advance requirements for investment in the banking model of Goodfriend and McCallum (2007). Impulse response functions from technology and monetary shocks show some attenuation effect due to the procyclical behavior of the...