Staff Report 538

Appendix for Financial Frictions and Fluctuations in Volatility

Cristina Arellano | Monetary Advisor
Yan Bai
Patrick J. Kehoe | Stanford University, University College London, Federal Reserve Bank of Minneapolis

Published December 8, 2016

Abstract
This appendix contains five sections. Section 1 provides details for the comparative statics exercise performed in the simple example. Section 2 discusses extending the model to allow firms to default on the wages for managers. Section 3 describes the firm-level and aggregate data. Section 4 contains the details of the computational algorithm. Finally, Section 5 reports the results for our model with a lower labor elasticity.

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