Investment Facing Credit Rationing
AbstractThe explicit expression of investment facing credit rationing and convex adjustment costs is derived. Three implications follow. First, the assumption of convex adjustment costs can be substituted by credit rationing to derive an investment function. Second, it explains how credit rationing acts as a financial 'brake' at the bottom of a slump, when investment demand is high and collateral is low. Third, it allows to derive the explicit Lagrange multiplier related to credit rationing and to check for misspecification in recent empirical work. Copyright 1998 by Blackwell Publishers Ltd and The Victoria University of Manchester
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Bibliographic InfoArticle provided by University of Manchester in its journal The Manchester School of Economic & Social Studies.
Volume (Year): 66 (1998)
Issue (Month): 0 (Supplement)
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Web page: http://www.socialsciences.manchester.ac.uk/disciplines/economics/
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- Jean-Bernard Chatelain, 2010. "The Profit-Investment-Unemployment nexus and Capacity Utilization in a Stock-Flow Consistent Model," UniversitÃ© Paris1 PanthÃ©on-Sorbonne (Post-Print and Working Papers) hal-00645155, HAL.
- Jean-Bernard Chatelain, 2003. "Structural Modelling of Financial Constraints on Investment: Where Do We Stand?," UniversitÃ© Paris1 PanthÃ©on-Sorbonne (Post-Print and Working Papers) halshs-00112522, HAL.
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- Jean-Christophe Teurlai, 2003. "Investissement corporel et coût du financement externe : identification de différents régimes et rôle du crédit-bail," Économie et Prévision, Programme National Persée, vol. 157(1), pages 51-70.
- Saltari, Enrico & Travaglini, Giuseppe, 2006. "The effects of future financing constraints on capital accumulation: Some new results on the constrained investment problem," Research in Economics, Elsevier, vol. 60(2), pages 85-96, June.
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