The Dynamic Effects of Firm Level Borrowing Constraints

John Jones

Discussion Papers from University at Albany, SUNY, Department of Economics

Abstract: The purpose of this paper is to develop a detailed dynamic model of firm behavior in order to see whether financial constraints are important propagation mechanisms. In addition, I consider whether the environments of individual firms affect the way in which financial constraints operate at the aggregate level. To do this, I develop a model of a firm that faces finance constraints, fixed costs and persistent idiosyncratic shocks. I find that persistent shocks can drive firms with similar financial endowments to adopt radically different financial policies. At the aggregate level, I find that financial constraints can affect the volatility and persistence of output, but that the sizes and even the directions of these effects are sensitive to firms' environments.

JEL-codes: E32 E62 (search for similar items in EconPapers)
Pages: 35 pages
Date: 2000
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Citations: View citations in EconPapers (1)

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Journal Article: The Dynamic Effects of Firm-Level Borrowing Constraints (2003)
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