Questions On Non Financial Firms

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1. Introduction
The 2007-2008 crisis started off in August 2007 as a subprime mortgage crisis primarily concentrated in the United States but quickly metamorphosized into a global financial crisis where financial institutions teeter on the edge of bankruptcy in many countries in addition to the United States. A global economic crisis ensues in which nonfinancial firms around the world appear to spiral downward as well. A key potential contributor to the plight of the non-financial firms is the financial crisis itself, in the form of a negative shock to the supply of external finance needed by non-financial firms. However, as the two quotes by some leading policymakers and scholars at the beginning of the paper indicate, the idea that non-financial firms suffer from a strongly negative supply-of-finance shock is not universally shared. In addition, if non-financial firms do not do well, there can certainly be other causes, such as a contraction of demand for their products.
This paper has three objectives. First, it aims to develop a simple framework that can capture and quantify the relative importance of the finance shock to the economic health of non-financial firms. Second, in a cross-country context, it aims to investigate whether the responsiveness of the real economy to a given finance shock varies by country features that the literature suggests that could matter, such as the type of a financial system, the nature of a monetary and exchange rate regime, or the extent
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