Is Risk the Fuel of the Business Cycle? Financial Frictions and Oil Market Disturbances
Christoph Schult
IWH Discussion Papers,
No. 4,
2024
Abstract
I estimate a dynamic stochastic general equilibrium (DSGE) model for the United States that incorporates oil market shocks and risk shocks working through credit market frictions. The findings of this analysis indicate that risk shocks play a crucial role during the Great Recession and the Dot-Com bubble but not during other economic downturns. Credit market frictions do not amplify persistent oil market shocks. This result holds as long as entry and exit rates of entrepreneurs are independent of the business cycle.
Read article
Alumni
IWH Alumni The IWH maintains contact with its former employees worldwide. We involve our alumni in our work and keep them informed, for example, with a newsletter. We also plan…
See page
IWH Bankruptcy Research
IWH Bankruptcy Research The Bankruptcy Research Unit of the Halle Institute for Economic Research (IWH) presents the Institute’s research on the topics of corporate bankruptcy,…
See page
Productivity
Productivity: More with Less by Better Available resources are scarce. To sustain our society's income and living standards in a world with ecological and demographic change, we…
See page
Work-Life Balance
Work-Life-Balance The IWH is family-friendly The Halle Institute for Economic Research constantly reviews and improves its framework for ensuring the compatibility of family and…
See page
Privacy
Data Protection Policy We take the protection of your personal data very seriously and treat your personal data with confidentiality and in compliance with the provisions of law…
See page
Research Clusters
Three Research Clusters Research Cluster "Economic Dynamics and Stability" Research Questions This cluster focuses on empirical analyses of macroeconomic dynamics and stability.…
See page
Population and labour market
Population and labour market Inhabitants are all people (Germans and foreigners) with permanent residence in federal territory (or in a Land). That does not include members of…
See page
Work-Life Balance
Work-Life-Balance The IWH is family-friendly The Halle Institute for Economic Research constantly reviews and improves its framework for ensuring the compatibility of family and…
See page
Long-run Competitive Spillovers of the Credit Crunch
William McShane
IWH Discussion Papers,
No. 10,
2023
Abstract
Competition in the U.S. appears to have declined. One contributing factor may have been heterogeneity in the availability of credit during the financial crisis. I examine the impact of product market peer credit constraints on long-run competitive outcomes and behavior among non-financial firms. I use measures of lender exposure to the financial crisis to create a plausibly exogenous instrument for product market credit availability. I find that credit constraints of product market peers positively predict growth in sales, market share, profitability, and markups. This is consistent with the notion that firms gained at the expense of their credit constrained peers. The relationship is robust to accounting for other sources of inter-firm spillovers, namely credit access of technology network and supply chain peers. Further, I find evidence of strategic investment, i.e. the idea that firms increase investment in response to peer credit constraints to commit to deter entry mobility. This behavior may explain why temporary heterogeneity in the availability of credit appears to have resulted in a persistent redistribution of output across firms.
Read article
