Ioannis Kospentaris

(Athens University)

will give a presentation on 

The Effects of Secondary Corporate Loan Trade on Credit Issuance and Job Creation

Abstract

An increasing share of corporate loans, a critical source of firm credit, are sold off banks’ balance sheets and actively traded in a secondary over-the-counter market. We develop a microfounded equilibrium search-theoretic model with labor, credit, and financial markets to explore how this secondary loan market affects the real economy, highlighting a trade-off: while the market reduces the steady-state level of unemployment by 0.6pp, it amplifies its response to a 1% productivity drop from 3.6% to 4.3%. Secondary market frictions matter significantly: eliminating them would not only reduce unemployment by 1.2pp, but also dampen its volatility down to 2.7%.

Join with Miroslav Gabrovski (University of Hawaii Manoa) and Lucie Lebeau (Federal Reserve Bank of Dallas)