Interest Rate Spreads, Credit Constraints, and Investment Fluctuations: An Empirical Investigation
Mark Gertler (),
Robert Hubbard () and
Anil Kashyap ()
No 3495, NBER Working Papers from National Bureau of Economic Research, Inc
We present a simple framework that incorporates a role for "interest rate spreads" in models of investment fluctuations. Formally, we develop a simple model of investment and financial contracting under asymmetric information that can he used to generate an Euler equation describing firms' intertemporal decisions about investment. The Euler equation is than estimated using data on U.S. producers' durable equipment investment. We find that during certain periods -- owing to agency-cost problems -- the basic Euler equation is violated, and shifts in interest rate differentials help predict investment. Thus, the empirical results lend support to models emphasizing how: (i) movements in agency costs of external finance can amplify investment fluctuation, and (ii) changes in the interest rate spread may signal movements in these agency costs.
Note: EFG ME
References: Add references at CitEc
Citations: View citations in EconPapers (17) Track citations by RSS feed
Published as Financial Markets and Financial Crises, ed. R. Glenn Hubbard, University of Chicago Press, 1991.
Published as Interest Rate Spreads, Credit Constraints, and Investment Fluctuations: An Empirical Investigation , Mark Gertler, R. Glenn Hubbard, Anil Kashyap. in Financial Markets and Financial Crises , Hubbard. 1991
Downloads: (external link)
Chapter: Interest Rate Spreads, Credit Constraints, and Investment Fluctuations: An Empirical Investigation (1991)
Working Paper: INTEREST RATE SPREADS, CREDIT CONSTRAINTS, AND INVESTMENT FLUCTUATIONS: AN EMPIRICAL INVESTIGATION (1990)
Working Paper: Interest rate spreads, credit constraints and investment fluctuations: an empirical investigation (1990)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:nbr:nberwo:3495
Ordering information: This working paper can be ordered from
Access Statistics for this paper
More papers in NBER Working Papers from National Bureau of Economic Research, Inc National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.. Contact information at EDIRC.
Bibliographic data for series maintained by ().