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Essays in Firm Heterogeneity and Financial Frictions

Ogaki, Ryota
http://orcid.org/0009-0002-6669-6314
http://rave.ohiolink.edu/etdc/view?acc_num=osu1721124753241987

Abstract Details

2024, Doctor of Philosophy, Ohio State University, Economics.
My dissertation explores the interaction between firm dynamics and financial frictions and its implication for aggregate dynamics. In Chapter 1, I study the efficiency of the U.S. corporate bankruptcy laws in the aggregate economy. To do so, I develop a general equilibrium heterogeneous firms model with endogenous bankruptcy choice and private information about firms' permanent productivity levels. According to current U.S. bankruptcy law, firms can choose from two bankruptcy options: Chapter 11 reorganization or Chapter 7 liquidation. In the model, private information hinders the screening of firms' permanent productivity, and firms with low permanent productivity can be more likely to be reorganized and continue operations after filing for bankruptcy, compared to the case with perfect information. Combined with private information, Chapter 11 reorganization increases the fraction of firms with low permanent productivity. As a result, this channel reduces aggregate output by 1.9\% in the economy with fixed wage. However, the lower equilibrium wage reduces the bankruptcy rate, increases firms' production, and restores the declined aggregate output in the general equilibrium. Lastly, as a source of business cycle fluctuations, I consider uncertainty shocks that raise the volatility of firms' idiosyncratic productivity and negative TFP shocks. The volatility effect of the shock makes lenders more uncertain about firms' types and increases the reorganization rates of firms with low permanent productivity. Even though the fraction of firms with high permanent productivity declines, the overall loss of aggregate output is quantitatively small because of the higher total production of firms with low permanent productivity. In addition, the negative TFP shock has a quantitatively small difference in an economy with and without private information. This is because the TFP shock evenly reduces the profit of firms with high and low permanent productivity. As a result, the ratio of high permanent productivity does not change much, which does not affect the lenders' belief. In Chapter 2, I explore the interaction between firm size distribution and the financial accelerator mechanism of monetary policy. To do so, I construct a heterogeneous firm New Keynesian model with collateral constraints, the Pareto productivity process, and the endogenous entry and exit decision. The idiosyncratic productivity of firms follows the Pareto productivity process, which quantitatively replicates the empirically observed skewed firm size distribution, and the endogenous entry and exit decisions generate cyclical patterns in response to monetary policy shocks. Relative to the standard lognormal productivity process, the collateral constraint affects a smaller fraction of firms but more significantly distorts the firm size. In the quantitative exercise, the expansionary monetary policy increases capital goods prices by stimulating the capital expenditure of financially unconstrained firms. The higher cost of expensive capital goods dominates the financial accelerator channel, and the capital expenditure of financially constrained firms becomes negative when the firm's size distribution is matched with data.
Aubhik Khan (Advisor)
Gabriel Mihalache (Committee Member)
Julia Thomas (Committee Member)
112 p.
Economics
Macroeconomics, Heterogeneity, Financial Frictions

Recommended Citations

Citations

  • Ogaki, R. (2024). Essays in Firm Heterogeneity and Financial Frictions [Doctoral dissertation, Ohio State University]. OhioLINK Electronic Theses and Dissertations Center. http://rave.ohiolink.edu/etdc/view?acc_num=osu1721124753241987

    APA Style (7th edition)

  • Ogaki, Ryota. Essays in Firm Heterogeneity and Financial Frictions. 2024. Ohio State University, Doctoral dissertation. OhioLINK Electronic Theses and Dissertations Center, http://rave.ohiolink.edu/etdc/view?acc_num=osu1721124753241987.

    MLA Style (8th edition)

  • Ogaki, Ryota. "Essays in Firm Heterogeneity and Financial Frictions." Doctoral dissertation, Ohio State University, 2024. http://rave.ohiolink.edu/etdc/view?acc_num=osu1721124753241987

    Chicago Manual of Style (17th edition)

osu1721124753241987
79
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This open access ETD is published by The Ohio State University and OhioLINK.