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Aggregate External Financing and Savings Waves

Andrea Eisfeldt and Tyler Muir

No 20442, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: US data display aggregate external financing and savings waves. Firms can allocate costly external finance to productive capital, or to liquid assets with low physical returns. If firms raise costly external finance and accumulate liquidity, either the cost of external finance is relatively low, or the total return to liquidity accumulation, including its shadow value as future internal funds, is particularly high. We formalize this intuition by estimating a dynamic model of firms’ financing and savings decisions, and use our model along with firm level data to construct an empirical estimate of the average cost of external finance from 1980-2014.

JEL-codes: E23 E32 E44 G01 G3 G32 (search for similar items in EconPapers)
Date: 2014-09
New Economics Papers: this item is included in nep-mac
Note: CF EFG
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Published as Andrea L. Eisfeldt & Tyler Muir, 2016. "Aggregate External Financing and Savings Waves," Journal of Monetary Economics, .

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