Credit Frictions and The Cleansing Effect of Recessions
Bibliographic Data
| ID | 9715176 |
|---|---|
| Authors | Sophie Osotimehin (University of Virginia), Francesco Pappadà (0000-0002-2764-4792, Banque de France) |
| Year | 2017 |
| Volume | 127 |
| Issue | 602 |
| Pages | 1153-1187 |
| Publication date | 2017-06-01 |
| Peer Reviewed | Yes |
| Open Access | Yes |
| Type | ARTICLE |
| Venue | The Economic Journal (JOURNAL) |
| Journal identifiers | ISSN: 0013-0133 • E-ISSN: 1468-0297 |
| Publisher | Oxford University Press (OUP) (PUBLISHER) |
| DOI | 10.1111/ecoj.12319 |
| OpenAlex | W1515764708 |
| Language | EN |
| Citations received | 6 |
| References cited | 23 |
Recessions are conventionally considered as times when the least productive firms are driven out of the market. How do credit frictions affect this cleansing effect of recessions? We build and calibrate a model of firm dynamics with credit frictions and endogenous entry and exit to investigate this question. We find that there is a cleansing effect of recessions in the presence of credit frictions, despite their effect on the selection of exiting and entering firms. This result holds true regardless of the nature of the recession: average firm‐level productivity rises following a negative aggregate productivity shock, as well as following a negative financial shock
Economics · Macroeconomics · Monetary economics · Productivity · Recession · Shock (circulatory · Corporate Finance and Governance · Firm Innovation and Growth · Global trade and economics
| Unique citing works | 6 |
|---|---|
| Citations per year | 0,6 |
| Citation span | 2016 - 2025 (10) |
| Citation velocity | recent |
| Highly cited | No |
| Citation types | Neutral: 6 |