TY  - GEN
AB  - I study the transmission of financial shocks using an estimated heterogeneous firm model. Following a contractionary financial shock, financially constrained firms cut investment, but unconstrained firms increase investment due to the lower capital price and interest rate. After matching the empirical dynamics of prices and the price elasticity of investment, I find a limited role of the unconstrained firms’ response in dampening the aggregate investment decline. Non-financial capital adjustment friction is the key to generating this result. Without the capital adjustment friction, unconstrained firms’ investment becomes unrealistically sensitive to prices, and the model would understate the financial shocks’ aggregate relevance. <p> <p> Data and code for peer-reviewed article published in American Economic Journal: Macroeconomics. When citing this dataset, please also cite the associated article. A sample Publication Citation is provided below.
AD  - Bank of Canada
AU  - Guo, Xing
DA  - 2024-07-01
DO  - 10.3886/E191747V1
DO  - DOI
ID  - 4358
LA  - eng
N2  - I study the transmission of financial shocks using an estimated heterogeneous firm model. Following a contractionary financial shock, financially constrained firms cut investment, but unconstrained firms increase investment due to the lower capital price and interest rate. After matching the empirical dynamics of prices and the price elasticity of investment, I find a limited role of the unconstrained firms’ response in dampening the aggregate investment decline. Non-financial capital adjustment friction is the key to generating this result. Without the capital adjustment friction, unconstrained firms’ investment becomes unrealistically sensitive to prices, and the model would understate the financial shocks’ aggregate relevance. <p> <p> Data and code for peer-reviewed article published in American Economic Journal: Macroeconomics. When citing this dataset, please also cite the associated article. A sample Publication Citation is provided below.
PB  - American Economic Association
PY  - 2024-07-01
T1  - Data and Code for "Reassessing the Relevance of Financial Shocks in an Estimated Heterogeneous Firm Model"
TI  - Data and Code for "Reassessing the Relevance of Financial Shocks in an Estimated Heterogeneous Firm Model"
Y1  - 2024-07-01
ER  -