This paper examines the behavior of the finance premium after technology and monetary shocks in a dynamic stochastic general equilibrium (DSGE) model where borrowers use a fraction of their production (output) as collateral. We show that this simple framework is capable of producing a...

This paper examines micro data on U.S. firms' inventories during different macroeconomic episodes. Much of the analysis focuses on the 1981-82 recession, a recession that was apparently precipitated by tight monetary policy. We find important cross-sectional effects in this period: firms that...

This paper examines micro data on U.S. firms' inventories during different macroeconomic episodes. Much of the analysis focuses on the 1981-82 recession, a recession that was apparently precipitated by tight monetary policy. We find important cross-sectional effects in this period: firms that...

Theory suggests that endogenous borrowing constraints amplify the impact of external shocks on the economy. How big is the amplification? In this paper, we quantitatively investigate this question in the context of a dynamic, general equilibrium model with borrowing constraints under two...