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The price of capital and the financial accelerator
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Pancrazi, Roberto, Seoane, Hernán D. and Vukotić, Marija (2016) The price of capital and the financial accelerator. Economics Letters, 149 . pp. 86-89. doi:10.1016/j.econlet.2016.10.022 ISSN 0165-1765.
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Official URL: http://dx.doi.org/10.1016/j.econlet.2016.10.022
Abstract
The price of capital is a key determinant of the financial accelerator, a transmission mechanism of shocks generated through the capital accumulation process of entrepreneurs that borrow in credit markets with frictions. This paper shows that the procedure of approximating the price of old capital by the net-of-depreciation price of new capital, as used in many articles since Bernanke et al. (1999), has profound implications when the capital depreciation rate is positive. When accounting for the appropriate price of capital, the effects of the financial accelerator are even stronger than originally assessed.
Item Type: | Journal Article | ||||||||
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Subjects: | H Social Sciences > HG Finance | ||||||||
Divisions: | Faculty of Social Sciences > Economics | ||||||||
Library of Congress Subject Headings (LCSH): | Junk bonds, Collateralized debt obligations, Collateralized mortgage obligations | ||||||||
Journal or Publication Title: | Economics Letters | ||||||||
Publisher: | Elsevier | ||||||||
ISSN: | 0165-1765 | ||||||||
Official Date: | 24 October 2016 | ||||||||
Dates: |
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Volume: | 149 | ||||||||
Page Range: | pp. 86-89 | ||||||||
DOI: | 10.1016/j.econlet.2016.10.022 | ||||||||
Status: | Peer Reviewed | ||||||||
Publication Status: | Published | ||||||||
Access rights to Published version: | Restricted or Subscription Access | ||||||||
Date of first compliant deposit: | 30 January 2017 | ||||||||
Date of first compliant Open Access: | 24 May 2018 | ||||||||
Funder: | Spain. Ministerio de Economía y Competitividad [Ministry of Economy and Competitiveness] (MINECO), Universidad Carlos III de Madrid Departamento de Economía | ||||||||
Grant number: | ECO2015-00212, EMDM 2014-0431 (MINECO), MadEco-CM (S2015/HUM-3444) | ||||||||
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