{"title":"The cyclicality of the finance premium over the business cycle","authors":"George J. Bratsiotis , Chashika D. Kalubowila","doi":"10.1016/j.econmod.2024.106943","DOIUrl":null,"url":null,"abstract":"<div><div>This paper examines the main determinants of the cyclicality of the finance premium in the <em>cost channel</em> framework, which has received less attention in the literature. We decompose the finance premium into a <em>cost effect</em> and a <em>leverage effect.</em> We show that in both the cost channel model and the credit channel model (Bernanke, Gertler and Gilchrist 1999), the cyclicality of the finance premium is determined mainly by the size and sign of the <em>leverage effect</em>. Some key factors that determine the leverage effect are, the nature of shocks, the degree of loan persistence in relation to output or net worth, and the stance of monetary policy.</div></div>","PeriodicalId":48419,"journal":{"name":"Economic Modelling","volume":"142 ","pages":"Article 106943"},"PeriodicalIF":4.2000,"publicationDate":"2024-11-15","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":"0","resultStr":null,"platform":"Semanticscholar","paperid":null,"PeriodicalName":"Economic Modelling","FirstCategoryId":"96","ListUrlMain":"https://www.sciencedirect.com/science/article/pii/S0264999324003006","RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":null,"EPubDate":"","PubModel":"","JCR":"Q1","JCRName":"ECONOMICS","Score":null,"Total":0}
引用次数: 0
Abstract
This paper examines the main determinants of the cyclicality of the finance premium in the cost channel framework, which has received less attention in the literature. We decompose the finance premium into a cost effect and a leverage effect. We show that in both the cost channel model and the credit channel model (Bernanke, Gertler and Gilchrist 1999), the cyclicality of the finance premium is determined mainly by the size and sign of the leverage effect. Some key factors that determine the leverage effect are, the nature of shocks, the degree of loan persistence in relation to output or net worth, and the stance of monetary policy.
期刊介绍：
Economic Modelling fills a major gap in the economics literature, providing a single source of both theoretical and applied papers on economic modelling. The journal prime objective is to provide an international review of the state-of-the-art in economic modelling. Economic Modelling publishes the complete versions of many large-scale models of industrially advanced economies which have been developed for policy analysis. Examples are the Bank of England Model and the US Federal Reserve Board Model which had hitherto been unpublished. As individual models are revised and updated, the journal publishes subsequent papers dealing with these revisions, so keeping its readers as up to date as possible.
京公网安备 11010802042870号
京ICP备2023020795号-1
分享
求助内容：
应助结果提醒方式：
扫码关注我们
