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The Cambridge-INET Institute


From Firms to the Aggregate Economy: The Role of Financial Frictions Mini Conference

Following the successful series of mini-conferences, the Faculty of Economics, Cambridge INET, and the Centre for Macroeconomics held the mini-conference "From Firms to the Aggregate Economy: The Role of Financial Frictions" on 2 March 2021. On this occasion, the conference brought together Nicholas Bloom (Stanford University), Sara Moreira (Northwestern University), and Adriano A. Rampini (Duke University), as speakers, and a long list of participants.

The conference tackled different mechanisms at which financial frictions affect the decisions of individual firms and how that translates to the aggregate economy. Adriano A. Rampini kicked off the conference by studying the usage of different types of debt, i.e. unsecured vs collateralized. He shows how firms adjust their liabilities structure depending on their financial conditions. When the financial conditions tighten, firms move to collateralized debt as it provides higher leverage. Then, Sara Moreira took the lead by analyzing how credit market disruptions affect firm innovation in the form of launching new products. Using a unique dataset, she shows that in periods where financial conditions are tighter firms launch fewer new products and those products introduce fewer novelties to the existing menu consumers have. Last but not least, Nicholas Bloom closed the conference analyzing how uncertainty and financial frictions interact and amplify each other. He uses a quantitative framework to show that periods of financial distress have more dramatic consequences if uncertainty is larger, i.e. a financial crisis produces larger initial output losses and the recovery is slower.

The negative effects of financial frictions on firms are particularly relevant in the spite of the current Covid-19 pandemic. The measures undertaken by Governments to control the number of infections, i.e. the lockdown of population, the restrictions to some sectors, are depleting the internal resources of firms and generating financial distress on them. The mechanisms analyzed in the conference are likely to be in place in the current situation, which already provides a framework to shed light on the effects of Covid-19 in the economy from a firm’s perspective.

Organised by: Dr. Miguel Ferreira, Dr. Juan Carlos Ruiz Garcia and Prof. Vasco Carvalho

Event Date: Tuesday 2nd March 2021

Time: 03:45pm - 06:30pm

Event Contact: Marion Reusch -

See programme for full details


Nicholas Bloom (Stanford University)
"The Finance Uncertainty Multiplier" (joint with I. Alfaro and X. Lin) - Paper | Slides

Sara Moreira (Northwestern University)
"Product Innovation and Credit Market Disruptions" (joint with J. Granja) - Paper | Slides

Adriano A. Rampini (Duke University)
"Collateral and Secured Debt" (joint with S. Viswanathan) - Paper



Aggregate Economy