Uncertainty shocks and corporate borrowing constraints

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dc.contributor.authorKamara, Ahmed
dc.contributor.authorKoirala, Niraj
dc.creator.orcidhttps://orcid.org/0000-0002-5092-8427en_US
dc.date.accessioned2023-03-01T20:33:40Z
dc.date.available2023-03-01T20:33:40Z
dc.date.issued2023-01-19
dc.description.abstractIn this paper, we study the effects of uncertainty shocks in a quantitative framework where firms in the corporate sector are constrained by credit. Specifically, we formulate borrowing constraints as a nested function that features both earnings and capital as alternative instruments for assessing credit worthiness, in line with recent trends in corporate finance. We find that the quantitative framework that incorporates only one instrument (capital or earnings) in the borrowing constraint falls short in matching the business cycle properties of the US economy in terms of the behavior of output, inflation, and the price markup which are an essential part of the literature on uncertainty shocks. Rather, a hybrid formulation of the borrowing constraint which accounts for both capital and earnings helps us bring the results in the quantitative model closer to the data.en_US
dc.identifier.citationKamara, Ahmed, and Niraj P. Koirala. 2023. Uncertainty Shocks and Corporate Borrowing Constraints. International Journal of Financial Studies 11: 21. https:// doi.org/10.3390/ijfs11010021en_US
dc.identifier.doihttps://doi.org/10.3390/ijfs11010021
dc.identifier.urihttps://hdl.handle.net/1969.6/95543
dc.language.isoen_USen_US
dc.rightsAttribution 4.0 International*
dc.rights.urihttp://creativecommons.org/licenses/by/4.0/*
dc.subjectuncertainty shocksen_US
dc.subjectearnings-based constraintsen_US
dc.subjectassets-based constraintsen_US
dc.titleUncertainty shocks and corporate borrowing constraintsen_US
dc.typeArticleen_US

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