Program > Papers by speaker > Gauthier David

This paper identifies financial shocks based on firm funding choices. I develop a general equilibrium model where firms fund production with bonds and loans. I show that only financial shocks generate opposite movements in the two types of debt as firms adjust their debt composition to the new credit conditions. In contrast, other shocks imply co-movements in the two types of debt. I use this result to identify financial shocks in a sign-restriction VAR model estimated with US data. The general equilibrium model allows me to recover a measure of financial stress and test the identification strategy.