Financing constraints, firm level adjustment of capital and aggregate implications

Ulf von Kalckreuth

No 2008,11, Discussion Paper Series 1: Economic Studies from Deutsche Bundesbank

Abstract: Following a positive shock, financing constraints will prolong or impede economic expansion that would have been optimal in an unconstrained environment. The study of dynamic adjustment therefore offers a direct way of verifying the presence of financing constraints and assessing their consequences for economic allocation. This paper compares the speed of adjustment of constrained and unconstrained firms using categorical information from survey data on the restrictions under which adjustment takes place. A set of moment conditions for the use in GMM estimation is developed, to cope with the problem of time varying speed of adjustment when the target level is partially unobserved. After estimating the micro-dynamics of capital demand, I show that the changing composition of the population makes for a time-varying sensitivity of the aggregate with respect to macroeconomic shocks.

Keywords: Financing constraints; adjustment; dynamic panel data models (search for similar items in EconPapers)
JEL-codes: C23 D21 D24 (search for similar items in EconPapers)
Date: 2008
New Economics Papers: this item is included in nep-bec
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Citations: View citations in EconPapers (7)

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Persistent link: https://EconPapers.repec.org/RePEc:zbw:bubdp1:7338

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