Political Connections, Discriminatory Credit Constraint and Business Cycle

PoLItIcaL busIness cycLe

Credit Spreads and Business Cycle Fluctuations

We re-examine the evidence on the relationship between credit spreads and economic activity, by constructing a credit spread index based on an extensive micro-level data set of secondary market prices of outstanding senior unsecured corporate bonds over the 1973–2009 period. Compared with the standard default-risk and other financial indicators, our credit spread index is a robust predictor of ...

Is the Political Business Cycle for Real?

This paper constructs and examines a macroeconomic model which combines features from both real and political business cycle models. We augment a standard real business cycle tax model by allowing for varying levels of government partisanship and competence in order to replicate two important empirical regularities: First, that on average the economy expands early under Democratic Presidents an...

Credit Constraints, FirmsPrecautionary Investment, and the Business Cycle

This paper studies the macroeconomic implications of …rms’precautionary real investment behavior in response to the anticipation of future …nancing constraints. Firms increase their demand for liquid and safe but low-return investments in anticipation of future borrowing constraints in order to decrease the probability of having to forego future pro…table investment opportunities. I show in a c...

Free Banking and Credit Creation: Implications for Business Cycle Theory

While the element of time may be the chief difficulty of almost every economic problem, the difficulties are most apparent and most persistently resist generally accepted solutions in the area of monetary theory and macroeconomics. Money, which simultaneously functions as a medium of exchange and a store of value, may be viewed as the quintessential present good or as a future good, the most li...