Credit Frictions and the Cleansing Effect of Recessions.

Osotimehin, Sophie; Pappadà, Francesco

doi:10.2139/ssrn.2743132

Cited by 19 publications

(19 citation statements)

References 46 publications

(30 reference statements)

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“…Our empirical results suggest a cleansing effect of uncertainty shocks. The literature on cleansing effect demonstrated that during recesssions less productive firms exit from the mar-ket while the most productive survive (Caballero and Hammour, 1994;Foster et al, 2016;Osotimehin and Pappadà, 2016;Aghion et al, 2019). We do not directly measure productivity of firms in our database, but if we proxy it by the return of FDI, our results suggest a cleansing effect too.…”

Section: Resultsmentioning

confidence: 88%

Cross-border investments and uncertainty: Firm-level evidence

Cezar

Gigout

Tripier

2020

Journal of International Money and Finance

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We study the impact of uncertainty on cross-border investments. We build a novel country and time-varying proxy for uncertainty based on FDI returns of French Multinational Firms. A rise in uncertainty has a direct negative short-term impact on cross-border investment flows to the affected country. Multinational firms with low ex-ante performance never recover while after a rise in uncertainty while higher performing multinational firms over compensate in the following periods. A model based on financial frictions explain the effect of uncertainty shocks on foreign investments and the heterogeneous responses of multinational firms. Cross-border Investments and Uncertainty Firm-level Evidence*

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Section: Resultsmentioning

confidence: 88%

Cross-border investments and uncertainty: Firm-level evidence

Cezar

Gigout

Tripier

2020

Journal of International Money and Finance

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“…Using a model calibrated with the Business Employment Dynamics data, Osotimehin and Pappadà (2013), show that while credit frictions (consistent with those described by Bernanke and Gertler, 1989) have a distortionary effect on the selection of exiting firms, they do not reverse the cleansing effect of recessions. The contrast between their conclusion and that of Barlevy (2003) rests on assumptions about characteristics of firms that differ by productivity.…”

Section: Literature Reviewmentioning

confidence: 73%

Reallocation in the Great Recession: Cleansing or Not?

Foster

Grim

Haltiwanger

2016

Journal of Labor Economics

210

101

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The research program of the Center for Economic Studies (CES) produces a wide range of economic analyses to improve the statistical programs of the U.S. Census Bureau. Many of these analyses take the form of CES research papers. The papers have not undergone the review accorded Census Bureau publications and no endorsement should be inferred. Any opinions and conclusions expressed herein are those of the author(s) and do not necessarily represent the views of the U.S. Census Bureau. All results have been reviewed to ensure that no confidential information is disclosed. Republication in whole or part must be cleared with the authors. To obtain information about the series, see www.census.gov/ces or contact Fariha Kamal, Editor,

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“…He shows it is possible that recessions are times of increased, but non-cleansing, reallocation. 6 In contrast, Osotimehin and Pappadà (2013) develop an alternative, related model where credit frictions have a distortionary effect on the selection of exiting firms, but they do not reverse the cleansing effect of recessions. The difference in these models is the interaction of productivity and credit constraints.…”

Section: Introductionmentioning

confidence: 99%

Reallocation in the Great Recession: Cleansing or Not?

Foster¹,

Grim²,

Haltiwanger³

2014

120

144

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The high pace of reallocation across producers is pervasive in the U.S. economy. Evidence shows this high pace of reallocation is closely linked to productivity. While these patterns hold on average, the extent to which the reallocation dynamics in recessions are "cleansing" is an open question. We find downturns prior to the Great Recession are periods of accelerated reallocation even more productivity enhancing than reallocation in normal times. In the Great Recession, we find the intensity of reallocation fell rather than rose and the reallocation that did occur was less productivity enhancing than in prior recessions.

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Credit Frictions and the Cleansing Effect of Recessions.

Abstract: We thank the editor Morten O. Ravn and three anonymous referees for their insightful comments and suggestions that greatly improved the paper. We also thank Guy Laroque for many helpful comments on a previous version of the paper, as well as

Cited by 19 publications

References 46 publications

Cross-border investments and uncertainty: Firm-level evidence

Cross-border investments and uncertainty: Firm-level evidence

Reallocation in the Great Recession: Cleansing or Not?

Reallocation in the Great Recession: Cleansing or Not?

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