Financial Frictions and the Great Productivity Slowdown

By R. Duval, Gee Hee Hong, Yannick Timmer. The Review of financial studies, 2017

184 citations recorded by the source corpus.

We study the role of financial frictions for productivity. Using a rich cross-country firm-level data, we exploit variation in preexisting exposure to the 2008 global financial crisis to study the post-crisis productivity slowdown. Firms with weaker precrisis balance sheets experienced a highly persistent decline in post-crisis total factor productivity growth relative to their less vulnerable counterparts, accounting for about one-third of the within-firm productivity slowdown. This decline was larger for firms that faced a more severe tightening of credit conditions. Financially fragile firms cut back on innovation activities, one channel through which financial frictions weakened post-crisis productivity growth.

Subfields: Economics and Econometrics, Finance

View Paper: https://www.semanticscholar.org/paper/a5231f1b0a1d5249e52e260cbe4c3f7382259f02

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Citations in the corpus

The Long-Run Effects of Monetary Policy (2020, result): “These results echo the important early findings by Evans (1992) who cast doubt on the exogeneity of TFP shocks, a key tenet of mainstream DSGE models, finding that money, interest rates, and government spending Granger-caused these impulses.”
Unmasking the Impact of COVID-19 on Businesses : Firm Level Evidence from across the World (2020, background): “During past crises, firms were less likely to undertake radical innovation and disproportionately cut back on intangible investment Granja and Moreira (2019); Duval et al. (2020).”