A new mechanism is proposed demonstrating how financial frictions can amplify real shocks to the economy. Building on work by Chang (1993), I show within a simple general equilibrium model that the preferences of managers and investors are more aligned in times of high productivity. In an...

This paper studies the productivity implications of the cyclical reallocation of capital. Frictions in the reallocation process are a source of factor misallocation. Cyclical movements in these frictions lead to variations in the degree of reallocation and thus in productivity. These frictions...

Abstract Job creation depends on a firm's age. Startups (firms of age zero) and young firms play a crucial role for job creation: they grow faster and create more net jobs than older incumbent firms. During the 2008-2009 recession the jobs created by those firms declined considerably, aversely...