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Intertemporal Variation in Financial Constraints on Investment: A Time-Varying Parameter Approach Using Panel Data

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  • Tahmiscioglu, A Kamil

Abstract

This article is concerned with understanding how financial constraints on investment vary over the business cycle and whether these constraints are related to macroeconomic policies. These issues are investigated within the framework of a time-varying parameter model using U.S. company panel data from 1971 to 1993. A preliminary investigation of parameter stability in investment equations using cross-sectional estimation techniques indicates a pattern of parameter variation that conforms to the one captured by the "return-to-normality" model. The return-to-normality model is estimated using a Bayesian approach. The estimation results provide evidence that support the predictions of the models of asymmetric information in capital markets.

Suggested Citation

  • Tahmiscioglu, A Kamil, 2001. "Intertemporal Variation in Financial Constraints on Investment: A Time-Varying Parameter Approach Using Panel Data," Journal of Business & Economic Statistics, American Statistical Association, vol. 19(2), pages 153-165, April.
    • Handle: RePEc:bes:jnlbes:v:19:y:2001:i:2:p:153-65
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    Cited by:

    1. Carlos Esteban Posada & José Fernando Escobar, 2004. "Crecimiento económico y gasto público: experiencias internacionales y el caso colombiano, 1982-99," Monetaria, CEMLA, vol. 0(2), pages 131-167, abril-jun.
    2. Ana Buisán & Juan Carlos Caballero & José Manuel Campa & Noelia Jiménez, 2004. "La importancia de la histéresis en las exportaciones de manufacturas de los países de la UEM," Monetaria, CEMLA, vol. 0(2), pages 169-222, abril-jun.
    3. Baik, Hyeoncheol & Han, Sumin & Joo, Sunghoon & Lee, Kangbok, 2022. "A bank's optimal capital ratio: A time-varying parameter model to the partial adjustment framework," Journal of Banking & Finance, Elsevier, vol. 142(C).
    4. Kalatzis, Aquiles Elie Guimarães & Azzoni, Carlos Roberto, 2009. "Investment decisions in troubled times: A Bayesian approach applied to Brazilian firms," International Journal of Production Economics, Elsevier, vol. 120(2), pages 595-606, August.
    5. John C. Driscoll & Steinar Holden, 2004. "Coordinación, trato justo y persistencia de la inflación," Monetaria, CEMLA, vol. 0(2), pages 97-129, abril-jun.

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