Working Paper: NBER ID: w28635
Authors: Tiago V. Cavalcanti; Joseph P. Kaboski; Bruno S. Martins; Cezar Santos
Abstract: Most aggregate theories of financial frictions model credit available at a single cost of financing but rationed. However, using a comprehensive firm-level credit registry, we document both high levels and high dispersion in credit spreads to Brazilian firms. We develop a quantitative dynamic general equilibrium model in which dispersion in spreads arises from intermediation costs and market power. Calibrating to the Brazilian data, we show that, for equivalent levels of external financing, dispersion has more profound impacts on aggregate development than single-price credit rationing and yields firm dynamics that are more consistent with observed patterns.
Keywords: No keywords provided
JEL Codes: E44; O11; O16
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| financing spreads (G32) | economic development (O29) |
| dispersion in credit spreads (G19) | firm dynamics (D21) |
| high intermediation costs and market power (D40) | financing costs (G32) |
| financial frictions (G19) | output per capita (E23) |
| financial frictions (G19) | wages (J31) |
| eliminating quantity constraints (C51) | GDP (E20) |
| turning off spreads (Y70) | total losses (G33) |
| financing spreads (G32) | output and total factor productivity (E23) |