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| Kevin x.d. Huang, Jie Chen, Zhe Li and Jianfei Sun |
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| ''Financial conditions and slow recoveries'' |
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| We present an RBC model with a collateral constraint whose tightness is randomly disturbed by a financial shock and evidence that such shock has become more persistent since 1980s. We show that this can be an important contributor to the recent slow recoveries, and a key mechanism may have to do with just-in-time-uses of labor and capital services in the face of continued tight credit conditions during the recoveries. Our econometric estimates of a New Keynesian model, which features various structural shocks and frictions, indicate that financial shocks can play a dominant role in accounting for the recent slow recoveries. |
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| Keywords: |
JEL: E3 - Prices, Business Fluctuations, and Cycles: General (includes Measurement and Data)
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| Manuscript Received : Apr 11 2015 | | Manuscript Accepted : Apr 13 2015 |
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