Dynamic Credit Constraints: Theory and Evidence from Credit Lines

Niklas Amberg, Tor Jacobson, Vincenzo Quadrini and Anna Rogantini Picco

No 19968, CEPR Discussion Papers from Centre for Economic Policy Research

Abstract: We use a comprehensive Swedish credit register to document that firms across the size distribution have access to substantial borrowing capacity via credit lines. However, most firms choose not to use all available credit, even though interest rates are low compared to their return on equity. The low utilization of credit is consistent with a theoretical model in which utilization rates decrease with both real and financial uncertainty. We estimate the model structurally at the firm level and find that financial uncertainty driven by liquidity shocks is much more important than real uncertainty driven by cash flow shocks for explaining the low utilization of credit.

Keywords: Uncertainty; Credit lines (search for similar items in EconPapers)
JEL-codes: D22 E44 G21 G32 (search for similar items in EconPapers)
Date: 2025-02
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