Parameters

Values

Source

Stochastic structure (TFP)

ρ, σ_ε

0.982, 0.014

Yaisawang et al. (2021)

Discount factor

β

0.95

Arellano (2008)

Risk aversion of the borrower

γ

2

Aguiar & Gopinath (2006)

Risk-free rate

r

0.01

Aguiar & Gopinath (2006)

Capital share

α

0.35

Park (2017)

Capital depreciation

δ

0.05

Romero-Barrutieta et al. (2015)

Capital adjustment cost

Φ

2.4

Yaisawang et al. (2021)

Output default cost

χ

7%

Tomz & Wright (2007)

Probability of re-entry

from full default

θ₁

5%

Yaisawang et al. (2021)

Probability of re-entry from

from partial default

θ₂

{0, 100%}

Variable in present paper

Partial debt repayment ratio

λ

{0, 100%}

Variable in present paper