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Explicit Lagrange Multiplier for Firms Facing a Debt Ceiling Constraint

  • Jean-Bernard Chatelain

    ()

    (CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Paris I - Panthéon-Sorbonne)

This paper provides the explicit expression of investment facing a binding debt ceiling and the explicit expression of the Lagrange multipliers related to the binding debt ceiling constraint. This result allows to check for misspecification of the parameterizations of these Lagrange multipliers used in Euler investment equations tests during the 1990's.

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Paper provided by HAL in its series Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) with number halshs-00119408.

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Date of creation: 2000
Date of revision:
Publication status: Published, Economics Letters, 2000, 67, 2, 153-158
Handle: RePEc:hal:cesptp:halshs-00119408
Note: View the original document on HAL open archive server: http://halshs.archives-ouvertes.fr/halshs-00119408
Contact details of provider: Web page: http://hal.archives-ouvertes.fr/

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  1. Schiantarelli, Fabio, 1996. "Financial Constraints and Investment: Methodological Issues and International Evidence," Oxford Review of Economic Policy, Oxford University Press, vol. 12(2), pages 70-89, Summer.
  2. Robert S. Chirinko, 1993. "Business fixed investment spending: a critical survey of modeling strategies, empirical results, and policy implications," Research Working Paper 93-01, Federal Reserve Bank of Kansas City.
  3. Whited, Toni M, 1992. " Debt, Liquidity Constraints, and Corporate Investment: Evidence from Panel Data," Journal of Finance, American Finance Association, vol. 47(4), pages 1425-60, September.
  4. Mark Gertler & R. Glenn Hubbard & Anil K. Kashyap, 1990. "Interest rate spreads, credit constraints and investment fluctuations: an empirical investigation," Finance and Economics Discussion Series 137, Board of Governors of the Federal Reserve System (U.S.).
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