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Credit Constraints and the Cyclicality of R&D Investment: Evidence from France

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  • Aghion, P.
  • Askenazy, P.
  • Berman, N.
  • Cette, G.
  • Eymard, L.

Abstract

We use a French firm-level panel data set over the period 1993-2004 to analyze the relationship between credit constraints and firms' R&D behavior over the business cycle. Our main results can be summarized as follows: (i) the share of R&D investment over total investment is countercyclical without credit constraints, but it becomes more procyclical as firms face tighter credit constraints; (ii) the result is magnified for firms in sectors that depend more heavily upon external finance; (iii) in more credit constrained firms, R&D investment share plummets during recessions but does not increase proportionally during upturns; (iv) average R&D investment and productivity growth are more negatively correlated with sales volatility in more credit constrained firms.

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Bibliographic Info

Paper provided by Banque de France in its series Working papers with number 198.

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Length: 36 pages
Date of creation: 2008
Date of revision:
Handle: RePEc:bfr:banfra:198

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Postal: Banque de France 31 Rue Croix des Petits Champs LABOLOG - 49-1404 75049 PARIS
Web page: http://www.banque-france.fr/
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Keywords: Business cycles ; R&D ; Credit constraints ; Volatility.;

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  1. Ramey, Garey & Ramey, Valerie A, 1995. "Cross-Country Evidence on the Link between Volatility and Growth," American Economic Review, American Economic Association, vol. 85(5), pages 1138-51, December.
  2. Diego Comin & Mark Gertler, 2003. "Medium Term Business Cycles," NBER Working Papers 10003, National Bureau of Economic Research, Inc.
  3. Patrick Francois & Huw Lloyd-Ellis, 2003. "Animal Spirits Through Creative Destruction," American Economic Review, American Economic Association, vol. 93(3), pages 530-550, June.
  4. Philippe Aghion & George-Marios Angeletos & Abhijit Banerjee & Kalina Manova, 2005. "Volatility and Growth: Credit Constraints and Productivity-Enhancing Investment," NBER Working Papers 11349, National Bureau of Economic Research, Inc.
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