We develop a model connecting financial shocks, capital investment decisions by firms, and change in measured aggregate productivity using a dynamic general equilibrium model. Data shows that post the 2008 crisis, firms changed their allocation between assets of varying depreciation rates as credit conditions tightened, which is connected to changes in measured TFP. We propose a model that shows the mechanism of an adverse shock to credit access causing firms to change the balance sheet portfolio composition of productive assets. This reallocation of assets leads to an increase in measured productivity.
Keywords: Financial crisis, measured productivity, collateral, capital assets, credit constraint.
JEL Classification: D5, E13, E22, E32, G01, G11, G23.
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