Debt, equity and the equity price puzzle

Arbeitspapier

We show that in a model with equity and debt financing, the specfication of the borrowing constraint is crucial to generate empirically plausible responses of macro variables and asset prices to financial shocks. The interaction between financial frictions and labor demand, as in Jermann and Quadrini (2012), is key to the result. A collateral constraint a la Kiyotaki and Moore (1997) augmented with a working capital assumption generates similar results on impact.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: Sveriges Riksbank Working Paper Series ; No. 314

Classification and Topics

• Classification: Wirtschaft ; Business Fluctuations; Cycles ; Financial Markets and the Macroeconomy
• Subject: liquidity shocks ; collateral constraints ; stock prices ; co-movement

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Finocchiaro, Daria ; Mendicino, Caterina
• Event: Veröffentlichung
• (who): Sveriges Riksbank
• (where): Stockholm
• (when): 2015

Further information

• Handle: http://hdl.handle.net/10419/157957
• Last update: 10.03.2025, 11:41 AM CET