Credit cycles and corporate investment: Direct tests using survey data on banks’ lending practices
Jakob Madsen and
Sarah Carrington
Journal of Macroeconomics, 2012, vol. 34, issue 2, 429-440
Abstract:
Microeconomic studies have found cash flow to be important for the investment decision and this result is often interpreted as evidence of adverse selection in credit markets. Using direct survey evidence on banks’ willingness to lend, this research examines the role of credit in the investment decision while allowing for cash-flow, Tobin’s q, income, uncertainty and default risks. Regression analysis reveals that banks’ willingness to lend, income and uncertainty are the key drivers of cyclical fluctuations in corporate investment. These results have important implications for the conduct of monetary policy as well as research on business cycles.
Keywords: Credit constraints; Corporate investment; Tobin’s q (search for similar items in EconPapers)
JEL-codes: E22 E5 (search for similar items in EconPapers)
Date: 2012
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Citations: View citations in EconPapers (4)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jmacro:v:34:y:2012:i:2:p:429-440
DOI: 10.1016/j.jmacro.2011.12.003
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