Financial Frictions

(Non-Monotonic) Effects of Productivity and Credit Constraints on Equilibrium Aggregate Production in General Equilibrium Models with Heterogeneous Producers ArXiv ID: 2501.12700 “View on arXiv” Authors: Unknown Abstract We show that, in a market economy, the aggregate production level depends not only on the aggregate variables but also on the distribution of individual characteristics (e.g., productivity, credit limit, …). We prove that, due to financial frictions, the equilibrium aggregate production may be non-monotonic in both individual productivity and credit limit. We provide conditions (based on exogenous parameters) under which this phenomenon happens. By consequence, improving productivity or relaxing credit limit of firms may not necessarily be beneficial to economic development. ...

Deep Learning for Solving and Estimating Dynamic Macro-Finance Models ArXiv ID: 2305.09783 “View on arXiv” Authors: Unknown Abstract We develop a methodology that utilizes deep learning to simultaneously solve and estimate canonical continuous-time general equilibrium models in financial economics. We illustrate our method in two examples: (1) industrial dynamics of firms and (2) macroeconomic models with financial frictions. Through these applications, we illustrate the advantages of our method: generality, simultaneous solution and estimation, leveraging the state-of-art machine-learning techniques, and handling large state space. The method is versatile and can be applied to a vast variety of problems. ...