This paper analyses the implications of corporate indebtedness for investment following large economic shocks. The empirical analysis is based on a large Orbis-iBACH firm-level data set for euro area countries from 2005 to 2018. Our results suggest that investment of high-debt firms is...

Financial accelerator theories imply that weak balance sheets can amplify adverse shocks on firm investment. This effect should be asymmetric, stronger in downturns than in upturns and stronger for small firms than for large firms. This paper provides empirical evidence of the presence of a...

This paper investigates the role of credit market size as a determinant of business cycle fluctuations. First, using OECD data I document that credit market depth mitigates the impact of variations in productivity to output volatility. Then, I use a business cycle model with borrowing limits a...

This paper assesses the linkages between money, credit, house prices and economic activity in industrialised countries over the last three decades. The analysis is based on a fixed-effects panel VAR estimated using quarterly data for 17 industrialized countries spanning the period 1970-2006. The...

The paper provides a systematic empirical analysis of the role of the housing market in the macroeconomy in the US and in the euro area. First, it establishes some stylised facts concerning key variables in the housing market, such as the real house price, residential investment and mortgage...

We augment a standard monetary DSGE model to include a banking sector and financial markets. We fit the model to Euro Area and US data. We find that agency problems in financial contracts, liquidity constraints facing banks and shocks that alter the perception of market risk and hit financial...

This paper develops a DSGE model where banks use short-term deposits to provide firms with long-term credit. The demand for long-term credit arises because firms borrow in order to finance their capital stock which they only adjust at infrequent intervals. Within an RBC framework, we show that...

This paper argues that counter-cyclical liquidity hoarding by financial intermediaries may strongly amplify business cycles. It develops a dynamic stochastic general equilibrium model in which banks operate subject to agency problems and funding liquidity risk in their inter- mediation activity....

We use the recent financial crisis period to analyse the effect of bank credit tightening on real firm investment. We derive a new set of credit tightening indexes from the ECB Bank Lending Survey. Combining these with annual balance sheet data from Germany, France, Italy, Spain, Belgium and...