Chari, Chirstiano and Kehoe argue that these three facts suggest that the crisis in the financial markets isn’t quite the problem many are making it out to be for non-financial firms. They argue that firms can finance investment via retained earnings and that if firms can lend directly to each other or pursue joint ventures. Thus the claims that disruptions in the banking/finance system pose a problem for non-financial firms is likely over-stated.
In conclusion the authors do not claim that there is no recession or that it isn’t possibly going to be a deep recession. They merely point out that many of the claims have yet to be seen in the aggregate data. They also argue that without these claims being true the case for massive government intervention has not been made
Posts
