Recessions are often accompanied by spikes of corporate default and prolonged declines of business credit. This paper shows that credit and default cycles can result from variations of self-fullling beliefs about credit market conditions. We develop a tractable macroeconomic model in which...

In U.S. data 1981–2012, unsecured firm credit moves procyclically and tends to lead GDP, while secured firm credit is acyclical; similarly, shocks to unsecured firm credit explain a far larger fraction of output fluctuations than shocks to secured credit. In this paper we develop a...

This paper argues that self-fulfilling beliefs in credit conditions can generate endogenously persistent business cycle dynamics. We develop a tractable dynamic general equilibrium model in which heterogeneous firms face idiosyncratic productivity shocks. Capital from less productive firms is...

The value of land in the balance sheet of French firms correlates positively with their hiring and investment flows. To explore the relationship between these variables, we develop a macroeconomic model with firms that are subject to both credit and labor market frictions. The value of...

In U.S. data 1981-2012, unsecured firm credit moves procyclically and tends to lead GDP, while secured firm credit is acyclical; similarly, shocks to unsecured firm credit explain a far larger fraction of output fluctuations than shocks to secured credit. In this paper we develop a tractable...