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This paper presents a general equilibrium model with endogenous collateral constraints to study the relationship between financial development and business cycle fluctuations in a cross-section of economies with different sizes of their financial sector. The financial sector can amplify or...
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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 … credit market size and output volatility. The model matches resonably well the reduction in productivity-driven output …
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