TY  - JOUR
AU  - Buera,Francisco J.
AU  - Moll,Benjamin
TI  - Aggregate Implications of a Credit Crunch
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 17775
PY  - 2012
Y2  - January 2012
UR  - http://www.nber.org/papers/w17775
L1  - http://www.nber.org/papers/w17775.pdf
N1  - Author contact info:
Francisco J. Buera
Department of Economics
University of California, Los Angeles
8283 Bunche Hall Office 8357
Mail Stop: 147703
Los Angeles, CA 90095
Tel: 310/825-8018
Fax: 310/825-9528
E-Mail: fjbuera@econ.ucla.edu

Benjamin Moll
Department of Economics
Princeton University
106 Fisher Hall
Princeton, NJ 08544
Tel: 609/258-0329
E-Mail: moll@princeton.edu
AB  - We take an off-the-shelf model with financial frictions and heterogeneity, and study the mapping from a credit crunch, modeled as a shock to collateral constraints, to simple aggregate wedges. We study three variants of this model that only differ in the form of underlying heterogeneity. We find that in all three model variants a credit crunch shows up as a different wedge: efficiency, investment, and labor wedges. Furthermore, all three model variants have an undistorted Euler equation for the aggregate of firm owners. These results highlight the limitations of using representative agent models to identify sources of business cycle fluctuations.
ER  -