Abstract This paper studies the macroeconomic effects of capital reallocation with financial shocks. I develop a model in which firms face borrowing constraints, idiosyncratic productivity shocks, and liquidation costs. The risks costs generate an option value staying business delay for unproductive firms. A new feature arises from delay. Unproductive that are not liquidated increase their leve...

Eggertson highlighted the problem of drug shortages in Canada and described initiatives of the Canadian Pharmacists Association, hospital pharmacists, and drug manufacturers to address the problem. Many stakeholders have underscored the importance of the drug shortage problem and its risks, but few quantitative data have been published. 3,4 A few regulatory agencies (e.g., the US Food and Drug ...

Anti-infective shortages pose significant logistical and clinical challenges to hospitals and may be considered a public health emergency. Anti-infectives often represent irreplaceable life-saving treatments. Furthermore, few new agents are available to treat increasingly prevalent multidrug-resistant pathogens. Frequent anti-infective shortages have substantially altered patient care and may l...

Shortages of medicines and vaccines have been reported in countries of all income levels in recent years. Shortages can result from one or multiple causes, including shortages of raw materials, manufacturing capacity problems, industry consolidation, marketing practices, and procurement and supply chain management. Existing approaches to mitigate shortages include advance notice systems managed...

This study examines the relationship between product differentiation and financial leverage. It argues that product differentiation is associated with investments in firm-specific assets that have lower liquidation value than general assets. Debt investors need to charge a higher interest rate to cover the risk of default, making the firm resort to equity financing and resulting in low financia...

Over the course of U.S. history there have been a number of occasions in which aggregate nominal spending has declined, the most recent of which occurred during the recession that began in December 2007. Coincident with these observed declines in nominal spending is a corresponding decline in the quantity of transaction assets and real output, where the former are defined as financial assets th...

This paper presents a monetary model in which consumption and capital investment can undergo upswings and downturns in the presence of collateral constraints. When the collateralized asset has a liquidation value below its full value, we show that a stable cyclical equilibrium can emerge in consumption and capital investment around the unstable steady state.