Production Smoothing When Bank Loan Supply Shifts: The Role of Variable Capacity Utilization

Hung-Jen Wang ()

Journal of Money, Credit and Banking, 2001, vol. 33, issue 3, 749-66

Abstract: How do firms smooth production when facing financing uncertainty? By using a model incorporating financing constraints, this paper shows that firms may adjust capacity utilization rates to buffer against financing disturbances. In particular, it emphasizes that variable capacity utilization plays the roles of both inter- and intra-temporal substitution of capital in this context. The paper presents results from the comparative statics and numerical calibrations of the model. These results show that the implied short-run dynamics are consistent with business cycle phenomena. The results also indicate that the long-run average of the capital stock is not likely to be affected by financing uncertainty, so that stabilization policy in the banking sector may only have a second-order welfare gain.

Date: 2001
References: Add references at CitEc
Citations: View citations in EconPapers (12)

There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:mcb:jmoncb:v:33:y:2001:i:3:p:749-66

Access Statistics for this article

Journal of Money, Credit and Banking is currently edited by Robert deYoung, Paul Evans, Pok-Sang Lam and Kenneth D. West

More articles in Journal of Money, Credit and Banking from Blackwell Publishing
Bibliographic data for series maintained by Wiley-Blackwell Digital Licensing () and Christopher F. Baum ().