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Financial constraints on R&D projects and minsky moments: containing the credit cycle

Author

Listed:
  • Juan Laborda

    (Universidad Carlos III)

  • Vicente Salas

    (Universidad de Zaragoza)

  • Cristina Suárez

    (Universidad de Alcalá)

Abstract

This paper tests Minsky’s financial instability hypothesis (FIH) for a panel of Spanish manufacturing firms. We find that the probability of a firm being financially constrained externally in terms of undertaking innovation projects moves inversely with the business and credit cycle, which is consistent with Minsky’s FIH. We provide evidence that the credit and business cycles strengthen each other. These results highlight the importance of implementing polices designed to contain the financial cycle.

Suggested Citation

  • Juan Laborda & Vicente Salas & Cristina Suárez, 2021. "Financial constraints on R&D projects and minsky moments: containing the credit cycle," Journal of Evolutionary Economics, Springer, vol. 31(4), pages 1089-1111, September.
    • Handle: RePEc:spr:joevec:v:31:y:2021:i:4:d:10.1007_s00191-021-00721-y
    DOI: 10.1007/s00191-021-00721-y
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    More about this item

    Keywords

    R&D; Financial constraints; Business cycle; Credit cycle; Financial instability hypothesis;
    All these keywords.

    JEL classification:

    • E12 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Keynes; Keynesian; Post-Keynesian; Modern Monetary Theory
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • G01 - Financial Economics - - General - - - Financial Crises

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