Macroeconomic Effects of Corporate Default Crises: A Long-Term Perspective
NBER Working Paper No. 17854
Using an extensive new data set on corporate bond defaults in the U.S. from 1866 to 2010, we study the macroeconomic effects of bond market crises and contrast them with those resulting from banking crises. During the past 150 years, the U.S. has experienced many severe corporate default crises in which 20 to 50 percent of all corporate bonds defaulted. Although the total par amount of corporate bonds has often rivaled the amount of bank loans outstanding, we find that corporate default crises have far fewer real effects than do banking crises. These results provide empirical support for current theories that emphasize the unique role that banks and the credit and collateral channels play in amplifying macroeconomic shocks.
Document Object Identifier (DOI): 10.3386/w17854
Published: Journal of Financial Economics Volume 111, Issue 2, February 2014, Pages 297–310 Cover image Macroeconomic effects of corporate default crisis: A long-term perspective ☆ Kay Gieseckea, Francis A. Longstaffb, c, , , Stephen Schaeferd, Ilya A. Strebulaeve, c
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