Showing papers by "Juan M. Sánchez published in 2012"
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TL;DR: In this article, a costly state verification model of financial intermediation is presented to address the question of how important financial development for economic development, and the model is calibrated to match facts about the U.S. economy, such as the intermediation spreads and the firm-size distributions for 1974 and 2004.
Abstract: How important is financial development for economic development? A costly state verification model of financial intermediation is presented to address this question. The model is calibrated to match facts about the U.S. economy, such as the intermediation spreads and the …firm-size distributions for 1974 and 2004. It is then used to study the international data using cross-country interest-rate spreads and per-capita GDPs. The analysis suggests a country like Uganda could increase its output by 116 percent if it could adopt the world’s best practice in the financial sector. Still, this amounts to only 29 percent of the gap between Uganda’s potential and actual output.
73 citations
TL;DR: In this article, a quantitative model of debt delinquency and bankruptcy is developed, which reproduces the dynamics of default and suggests an interpretation of the data in which lenders frequently reset loan terms for delinquent borrowers, typically offering partial debt forgiveness, instead of a blanket imposition of the penalty rates most unsecured credit contracts specify.
Abstract: This article documents and interprets a fact central to the dynamics of informal consumer debt default. We observe that for individuals 60– 90 days late on payments, (i) 85% make payments during the next quarter, and (ii) 40% reduce their debt. To understand these facts, we develop a quantitative model of debt delinquency and bankruptcy. Our model reproduces the dynamics of delinquency and suggests an interpretation of the data in which lenders frequently reset loan terms for delinquent borrowers, typically offering partial debt forgiveness, instead of a blanket imposition of the “penalty rates†most unsecured credit contracts specify.
27 citations
TL;DR: This article showed that the relationship among GDP growth, the unemployment rate, and the employment-to-population ratio cast doubt on using these relationships to predict future unemployment, and they also pointed out that these relationships may not accurately predict future economic growth.
Abstract: Recent changes in the relationships among GDP growth, the unemployment rate, and the employment-to-population ratio cast doubt on using these relationships to predict future unemployment.
5 citations
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3 citations
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TL;DR: In this paper, the role of the construction sector in accounting for the performance of the U.S. economy before, during and after the Great Recession is evaluated using input-output analysis to evaluate its linkages with the rest of the economy.
Abstract: This paper evaluates the role of the construction sector in accounting for the performance of the U.S. economy before, during and after the Great Recession. We use input-output analysis to evaluate its linkages with the rest of the economy and measure the transmission of its demand shocks to the overall economy. Such effects are quantified by means of a dynamic multi-sector model parameterized to reproduce the boom-bust dynamics of employment in construction during 2000-13. The model suggests that the interlinkages account for a large share of the actual changes in aggregate employment and gross domestic product during the previous expansion, the recession and the subsequent recovery.
2 citations
TL;DR: Gross job losses for large firms were 60 percent higher in 2009:Q2 than in 2006:Q1, while those for medium and small firms were 42 percent and 12 percent higher, respectively.
Abstract: Gross job losses for large firms were 60 percent higher in 2009:Q2 than in 2006:Q1, while those for medium and small firms were 42 percent and 12 percent higher, respectively.
TL;DR: In this article, the authors identify the underlying mechanisms that led to such a large increase in cash holdings and identify the incentives for firms to keep the earnings in the U.S. The so-called repatriation tax is one of the leading explanations for this type of cash hoarding.
Abstract: C ash holdings by U.S. firms have increased significantly since the early 1990s. In particular, total cash holdings by publicly traded U.S. firms have increased from around $800 billion in 1990 to around $5 trillion in 2011. Identifying the underlying mechanisms that led to such a large increase in cash holdings has been the focus of recent economic discussion. The so-called repatriation tax is one of the leading explanations for this type of cash hoarding. This essay analyzes this argument.1 The repatriation tax is the tax U.S. firms must pay if they bring back the income generated abroad that was taxed by a foreign government at rates lower than U.S. tax rates. The key point is that this tax is exercised only when the earnings are repatriated, which provides incentives for firms to keep the earnings abroad. As a consequence, many have argued that this incentive explains why firms accumulate large cash holdings abroad, thereby creating the aforementioned increase in aggregate cash holdings. The repatriation tax may be particularly relevant to cash holdings now because during the recent recession the income generated abroad by U.S. corporations increased sharply, in contrast to declines in such holdings in previous recessions. Specifically, the income generated abroad by U.S. firms increased 18 percent during the 2007-09 period compared with decreases of 34 percent and 16 percent, respectively, during the recessions of 1990-91 and 2001.2
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TL;DR: This article found that employment at small firms typically declines more than employment at large firms during recessions, and that this was not the case during the Great Recession of 2007-09, however.
Abstract: Conventional wisdom says that employment at small firms declines more than employment at large firms during recessions. However, that doesn’t seem to have been the case during the Great Recession of 2007-09.
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TL;DR: In this paper, the authors focused on credit flows among publicly traded firms at the national level and also examined a sample of firms headquartered in the Eighth District and found that the reallocation of financial resources (e.g., credit) has been low in the current recovery compared with what happened in past recoveries.
Abstract: As stated by University of Maryland economics professor John Haltiwanger, the sorting of successful business endeavors from unsuccessful ones is a central and necessary part of our market economy, and it is essential that the public and policymakers understand this process.1 Our previous studies show that the reallocation of employment has been low in the current recovery compared with what happened in past recoveries.2 Business Employment Dynamics data from the Bureau of Labor Statistics reveal that employment turnover was significantly lower following the Great Recession than following the former two recessions, in 2001 and 1990. The same trend appears in the creation of startups.3 By the first quarter of 2010, business closings declined to prerecession levels for both the nation and the Eighth District, but business formations were slower to recover. Although these studies analyze the behavior of the labor market and small firms (those entering and exiting), little is known about reallocation of resources among larger, more-established firms. This article concentrates on credit flows among publicly traded firms at the national level and also examines a sample of firms headquartered in the Eighth District. Studying the reallocation of financial resources (e.g., credit) is important: Economists Jith Jayaratne and Philip Strahan argued in their 1996 study that the intrastate branching reform in the United States played an important role in economic growth by improving the allocation of capital.4 To understand the definition of credit reallocation, we need to introduce two related concepts: credit creation and destruction.5 Credit creation is the sum of
TL;DR: Employment turnover was significantly lower following the Great Recession than following the previous two recessions as mentioned in this paper, and employment turnover was higher during the early 1990s than during previous recessions.
Abstract: Employment turnover was significantly lower following the Great Recession than following the previous two recessions.