Optimal capital stock and financing constraints

Enrico Saltari and Giuseppe Travaglini

MPRA Paper from University Library of Munich, Germany

Abstract: In this paper we show that financing constraints affect the optimal level of capital stock even when the financing constraint is ineffective. This happens when the firm rationally anticipates that access to external financing resources may be rationed in the future. We will show that with these expectations, the optimal investment policy is to invest less in any given period, thereby lowering the desired optimal capital stock in the long run.

Keywords: Investment; capital stock; constraints; uncertainty (search for similar items in EconPapers)
JEL-codes: E22 E44 E51 (search for similar items in EconPapers)
Date: 2011-11-29
New Economics Papers: this item is included in nep-ias and nep-mac
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:35094

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