Using micro-level data, we construct a credit spread index with considerable predictive power for future economic activity. We decompose the credit spread into a component that captures firm-specific information on expected defaults and a residual component--the excess bond premium. Shocks to...

Financial frictions distort the allocation of resources among productive units--all else equal, firms whose financing choices are affected by such frictions face higher borrowing costs than firms with ready access to capital markets. As a result, input choices may differ systematically across...

To identify disruptions in credit markets, research on the role of asset prices in economic fluctuations has focused on the information content of various corporate credit spreads. We re-examine this evidence using a broad array of credit spreads constructed directly from the secondary bond...