Measured total factor productivity often declines sharply during financial crises. In 1982, the Chilean manufacturing sector suffered a severe contraction in output, most of which can be accounted for by a falling Solow residual. This paper uses establishment data from the Chilean manufacturing...

Credit supply and demand changes are mostly unobserved, thus identifying completely the transmission of monetary policy through the credit channel is unfeasible. Bank lending surveys by central banks, however, contain reliable quarterly information on changes in loan conditions due to bank, firm...

Financial crises in emerging economies are accompanied by a large fall in total factor productivity. We explore the role of financial frictions in exacerbating the misallocation of resources and explaining this drop in TFP. We build a two-sector model of a small open economy with a working...

Monetary policy has real effects through credit supply and demand, and since these changes are mostly unobserved, the complete identification of the credit channel is generally unfeasible. Bank lending surveys by central banks, however, contain reliable quarterly information on changes in loan...

While a large literature studies the causes of financial crises, little is known about the mechanisms by which crises lead to output drops. We perform an exploratory analysis of output drops by applying the Business Cycle Accounting (BCA) methodology developed by Chari et al. (2007) to a sample...

This paper develops a monetary model with taxes to account for the time-varying effects of energy shocks on output and hours worked in post-World War II U.S. data. In our model, the real effects of an energy shock are amplified when the monetary authority responds to that shock by changing its...

We study the effects of German unification in a model with capital accumulation, skill differences and a welfare state. We argue that this event is similar to a mass migration of low-skilled agents holding no capital into a foreign country. Absent a welfare state, we observe an investment boom,...

We study the behavior of output, employment, consumption, and investment in Germany during the Great Depression of 1928-37. In this time period, real wages were countercyclical, and productivity and fiscal policy was procyclical. We use the neoclassical growth model to investigate how much these...

We show that in a two-sector real business cycle model wtih sufficiently strong investment externalities, a regressive tax policy can stabilize the economy against fluctuations driven by agents' animal spirits. By contrast, this economy with a flat or progressive tax scheme (such as that in the...

We study the effects of credit shocks in a model with heterogeneous entrepreneurs, financing constraints, and a realistic firm-size distribution. As entrepreneurial firms can grow only slowly and rely heavily on retained earnings to expand the size of their business, we show that, by reducing...