Real versus financial frictions to capital investment

Nihal Bayraktar, Plutarchos Sakellaris and Philip Vermeulen

No 566, Working Paper Series from European Central Bank

Abstract: We formulate and estimate a structural model of firm investment behavior that specifies the exact channel through which financial frictions bite. The model also allows for the existence of both convex and non-convex costs to adjusting capital. Essentially, we move beyond simply testing and rejecting a neoclassical model without frictions. Our quantitative estimates show that both real and financial frictions have an important effect on firm investment dynamics. JEL Classification: E22

Keywords: adjustment costs; financing constraints.; investment (search for similar items in EconPapers)
Date: 2005-12
Note: 327651
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (29)

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Persistent link: https://EconPapers.repec.org/RePEc:ecb:ecbwps:2005566

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