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Survive another day: using changes in the composition of investments to measure the cost of credit constraints

Luis Garicano () and Claudia Steinwender ()

LSE Research Online Documents on Economics from London School of Economics and Political Science, LSE Library

Abstract: We introduce a novel empirical strategy to measure the size of credit shocks. Theoretically, we show that credit shocks reduce the value of long-term relative to short-term investments. Empirically, we can therefore compare the reduction of long-term relative to short-term investments within firms, allowing for firm-times-year fixed effects. Using Spanish firm level data, we estimate the credit crunch to be equivalent to an additional tax rate of around 11% on the longest lived capital. To pin down credit constraints as the underlying cause, we apply triple differences strategies using foreign ownership or pre-crisis debt maturity.

JEL-codes: D24 E22 E32 G31 (search for similar items in EconPapers)
Date: 2016-12-01
New Economics Papers: this item is included in nep-cfn and nep-mac
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Published in Review of Economics and Statistics, 1, December, 2016, 98(5), pp. 913-924. ISSN: 0034-6535

Downloads: (external link)
http://eprints.lse.ac.uk/65862/ Open access version. (application/pdf)

Related works:
Journal Article: Survive Another Day: Using Changes in the Composition of Investments to Measure the Cost of Credit Constraints (2016) Downloads
Working Paper: Survive Another Day: Using Changes in the Composition of Investments to Measure the Cost of Credit Constraints (2013) Downloads
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