Financial constraints on R&D projects and minsky moments: containing the credit cycle

Juan Laborda, Vicente Salas and Cristina Suarez
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Juan Laborda: Universidad Carlos III
Vicente Salas: Universidad de Zaragoza

Journal of Evolutionary Economics, 2021, vol. 31, issue 4, No 1, 1089-1111

Abstract: Abstract This paper tests Minsky’s financial instability hypothesis (FIH) for a panel of Spanish manufacturing firms. We find that the probability of a firm being financially constrained externally in terms of undertaking innovation projects moves inversely with the business and credit cycle, which is consistent with Minsky’s FIH. We provide evidence that the credit and business cycles strengthen each other. These results highlight the importance of implementing polices designed to contain the financial cycle.

Keywords: R&D; Financial constraints; Business cycle; Credit cycle; Financial instability hypothesis (search for similar items in EconPapers)
JEL-codes: E12 E32 G01 (search for similar items in EconPapers)
Date: 2021
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DOI: 10.1007/s00191-021-00721-y

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