This paper examines a tractable real business cycle model with idiosyncratic productivity shocks and binding credit constraints on entrepreneurs. The model shows how firm volatility increases in combination with credit market development.
The authors review the empirical literature that studies the relationship between foreign direct investment, productivity, and growth using aggregate data and focus on two questions: Is there evidence of a positive relationship between foreign direct investment and national growth? And does the output of the "multinational sectors" exhibit higher labor productivity?
The financial crisis that began in the summer of 2007 took a turn for the worse in September 2008. Until then, Federal Reserve actions taken to improve the functioning financial markets did not affect the monetary base.
All holders of mortgage contracts, regardless of type, have three options: keep their payments current, prepay (usually through refinancing), or default on the loan. The latter two options terminate the loan. The termination rates of subprime mortgages that originated each year from 2001 through 2006 are surprisingly similar: about 20, 50, and 80 percent, respectively, at one, two, and three years after origination.