I develop a highly tractable general equilibrium model in which heterogeneous producers face collateral constraints, and study the effect of financial frictions on capital misallocation and aggregate productivity. My economy is isomorphic to a Solow model but with time-varying TFP. I argue that the persistence of idiosyncratic productivity shocks determines both the size of steady-state productivity losses and the speed of transitions: if shocks are persistent, steady-state losses are small but transitions are slow. Even if financial frictions are unimportant in the long run, they tend to matter in the short run and analyzing steady states only can be misleading.

/pdf/productivity-losses-from-financial-frictions-can-self-47uhaqytn9.pdf

Productivity Losses from Financial Frictions: Can Self-Financing Undo Capital Misallocation?

In this paper, we exploit a new multi-country historical dataset on public (government) debt to search for a systemic relationship between high public debt level growth and inflation our main result is that whereas the link between growth and debt seems relatively weak at “normal” debt levels, median growth rates for countries with over roughly ninety percent of gdp are about one percent lower than otherwise; average (mean) growth rates are several percent lower . surprisingly,

Growth in a Time of Debt

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Supermodularity And Complementarity

This paper analyses the interaction between credit constraints and trading behavior, decomposing trade in extensive and intensive margins. I construct a unique dataset containing firm-level trade transactions data, balance sheets and credit scores from an independent credit insurance company for Belgian manufacturing firms between 1999 and 2007. Firms are more likely to be exporting or importing if they enjoy lower credit constraints. Also, firms that have better credit rating export and import more, and more products. They export to more countries. Importing and exporting behavior differ in both the static and dynamic analysis of how various margins of trade are related to credit constraints in one important dimension. In the case of exports, it is the extensive margin of exports in terms of both product and destinations that are significantly associated with credit constraints whereas for imports it is the extensive margin in terms of products only.

/pdf/exporters-importers-and-credit-constraints-30dlz9kzeb.pdf

Exporters, Importers and Credit Constraints

All Matlab and C++ programs necessary to produce the results of the article. There is also a Excel spreadsheet with Mexican data.

Code and data files for "Fiscal Policy and Default Risk in Emerging Markets"

This paper studies the role of financial frictions as a barrier to international trade. We study new exporter dynamics to identify how these frictions affect export decisions. We introduce a borrowing constraint and working capital requirements into a standard model of international trade, with exports more working capital intensive than domestic sales. Our model can quantitatively account for new exporter dynamics, in contrast to a model with sunk export entry costs. We provide additional evidence in support of our mechanism. We find that financial frictions reduce the impact of a trade liberalization, suggesting that they constitute an important trade barrier.

/pdf/financial-frictions-and-new-exporter-dynamics-1bvpjrajds.pdf

Financial Frictions and New Exporter Dynamics

This article studies the role of financial frictions as a barrier to international trade. We study new exporter dynamics to identify how these frictions affect export decisions. We introduce a borrowing constraint and working capital requirements into a standard model of international trade, with exports more working capital intensive than domestic sales. Our model can quantitatively account for new exporter dynamics in contrast to a model with sunk export entry costs. We provide additional evidence in support of our mechanism. We find that financial frictions reduce the impact of trade liberalization, suggesting that they constitute an important trade barrier.

/pdf/financial-frictions-and-new-exporter-dynamics-3i9gx6t6bv.pdf

Financial frictions and new exporter dynamics

https://econweb.ucsd.edu/~itrevino/pdfs/szkup_trevino_theory_final.pdf

Information acquisition in global games of regime change

We solve and test experimentally a discrete global games model of speculative attack where agents choose, at a cost, the precision of the private signal they observe. We prove existence of a unique equilibrium in the coordination game and explore strategic incentives in information acquisition. In the experiment, we …nd that subjects follow the strategies suggested by the theory, but, contrary to our predictions, the number of attacks increases as subjects acquire more precise information. This implies that as the precision of the signal increases, the actions of subjects move towards e¢ ciency and not risk dominance, which contradicts previous well known results of global games. Therefore, our results suggest that acquiring more precise information

/pdf/costly-information-acquisition-in-a-speculative-attack-3md4a12zwy.pdf

Michal Szkup

Papers

Financial Frictions and New Exporter Dynamics

Financial frictions and new exporter dynamics

Information acquisition in global games of regime change

Costly information acquisition in a speculative attack: Theory and experiments

Sentiments, strategic uncertainty, and information structures in coordination games