The financial accelerator and the flight to quality

Ben Bernanke, Mark Gertler, Simon Gilchrist

    Research output: Contribution to journalArticlepeer-review


    Adverse shocks to the economy may be amplified by worsening credit-market conditions - the "financial accelerator." Theoretically, we interpret the financial accelerator as resulting from endogenous changes over the business cycle in the agency costs of lending. An implication of the theory is that, at the onset of a recession, borrowers facing high agency costs should receive a relatively lower share of credit extended (the flight to quality) and hence should account for a proportionally greater part of the decline in economic activity. We review the evidence for these predictions and present new evidence drawn from a panel of large and small manufacturing firms.

    Original languageEnglish (US)
    Pages (from-to)1-15
    Number of pages15
    JournalReview of Economics and Statistics
    Issue number1
    StatePublished - Feb 1996

    ASJC Scopus subject areas

    • Social Sciences (miscellaneous)
    • Economics and Econometrics


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