Tuesday 04 November 2025 11:00 - 12:00

This event is both online and in person

SAL 2.04, 2nd Floor Conference Room, Sir Arthur Lewis Building, LSE, 32 Lincoln's Inn Fields, London WC2A 3PH

About this event

We examine the impact of firm-level default risk on aggregate economic performance. First, we develop a micro-to-macro model, and show that firms' default risk serves as a sufficient statistic for credit frictions. We next use this model to quantify the impact of credit frictions, leveraging administrative data on the population of UK employer firms, augmented with a measure of default risk from S&Ps widely used algorithm. Between 2004-2019, credit frictions reduce aggregate output by 28%, on average. This output gap due to frictions grew post-financial crisis and again after the Brexit vote. We compare partial and general equilibrium impacts, showing that approaches that abstract equilibrium wage rises significantly over-estimate output gains. Finally, reduced frictions and higher wages create both winners and losers across industries and firm-size groups, highlighting the redistributive role of the uneven access to credit.

Participants are expected to adhere to the Events Code of Conduct.

This event will take place in SAL 2.04, 2nd Floor Conference Room, Sir Arthur Lewis Building, LSE, 32 Lincoln's Inn Fields, London WC2A 3PH.