THE TFP CHANNEL OF CREDIT SUPPLY SHOCKS

Research output: Contribution to journalArticlepeer-review

Abstract

—Recent work stresses a potentially important relation between credit supply shocks and aggregate TFP based on factor misallocation. I take three steps to examine this relation. First, using state-of-the-art credit supply shock and aggregate TFP measures, I show that an adverse credit supply shock has a weak and very short-lived effect on aggregate TFP. Sec-ond, using firm-level data, I show that firm-level capital stock responses to an adverse credit supply shock produce an insignificant and negligible capital-misallocation–induced TFP response. Third, using employment data by fine firm-size category classification, I also find a negligible labor-misallocation–induced TFP response. These findings suggest that the TFP channel of credit supply shocks has a limited role in their transmission to the real economy.

Original languageEnglish
Pages (from-to)425-441
Number of pages17
JournalReview of Economics and Statistics
Volume105
Issue number2
DOIs
StatePublished - 1 Mar 2023

ASJC Scopus subject areas

  • Social Sciences (miscellaneous)
  • Economics and Econometrics

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