English, Article, Journal or magazine article edition: Investigating fluctuations in U.S. manufacturing : what are the direct effects of informational frictions? WenLi Li; Pierre-Daniel Sarte

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Bookmark: http://trove.nla.gov.au/version/74535
Physical Description
  • preprint
Language
  • English

Edition details

Title
  • Investigating fluctuations in U.S. manufacturing : what are the direct effects of informational frictions?
Author
  • WenLi Li
  • Pierre-Daniel Sarte
Physical Description
  • preprint
Notes
  • In this paper, we explore how informational frictions in credit markets directly affect U.S. manufacturing fluctuations. Within the context of a dynamic industry model, we propose a strategy for identifying intermediation costs related to informational asymmetries between lenders and borrowers. The analysis suggests that these costs have been steadily falling over the post-war period. We also present evidence that changes in the cost of intermediation should directly affect output, as opposed to just propagating the effects of other shocks. Finally, we find that the relative share of output fluctuations explained by financial innovations increases monotonically over time. Therefore, policy changes that reduce financial frictions, and thereby increase output, are likely to be most effective in the long run.
  • Business cycles
  • RePEc:fip:fedrwp:00-01
Language
  • English
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