On the interaction of financial frictions and fixed capital adjustment costs: Evidence from a panel of German firms

Journal of Economic Dynamics and Control

Volumn 32, Issue 11, 2008, Pages 3538-3559

  Bayer, Christian ^a,b  

^a BOCCONI UNIVERSITY   (Italy)

^b TU DORTMUND UNIVERSITY   (Germany)

Author keywords

Imperfect capital markets; Investment; Non convex adjustment costs; Non linear panel cointegration

Indexed keywords

EID: 52949090029     PISSN: 01651889     EISSN: None     Source Type: Journal    
DOI: 10.1016/j.jedc.2008.02.004     Document Type: Article

References (48)

1. Abel, A.B., Eberly, J.C., 2002. Investment and q with fixed costs: an empirical analysis. Mimeo, University of Pennsylvania.
2. Barnett S.A., and Sakellaris P. A new look at firm market value, investment and adjustment costs. Review of Economics and Statistics 81 2 (1999) 250-260
3. Bayer C. Aggregate investment dynamics when firms face fixed investment cost and capital market imperfections. Journal of Monetary Economics 53 (2006) 1909-1947
4. Bayer, C., 2006b. (Non?)-Convex costs of factor adjustment and the gap-model: evidence from a Monte Carlo experiment. Conference Paper, Annual Meeting of the European Economic Association.
5. Bernanke B., Gertler M., and Gilchrist S. The financial accelerator in a quantitative business cycle framework. In: Taylor J., and Woodford M. (Eds). The Handbook and Macroeconomics (1999), North-Holland, Amsterdam
6. Blinder A.S. Comments and discussion to Fazzari et al., financing constraints and corporate investment. Brooking Papers on Economic Activity 1 (1988) 196-200
7. Blundell R., and Bond S. Initial conditions and moment restrictions in dynamic panel data models. Journal of Econometrics 87 1 (1998) 115-143
8. Blundell, R., Bond, S., Windmeijer, F., 2000. Estimation in dynamic panel data models: improving on the performance of the standard GMM estimator. In. Baltagi, B. (Ed.), Advances in Econometrics, Nonstationary Panels, Panel Cointegration, and Dynamic Panels, vol. 15, JAI Elsevier, Amsterdam.
9. Bond, S., Cummins, J., 2001. Noisy share prices and the q model of investment. IFS Working Paper W01/22.
10. Bond S., Ann Elston J., Mairesse J., and Mulkay B. Financial factors and investment in Belgium, France, Germany, and the United Kingdom: a comparison using company panel data. Review of Economics and Statistics 85 1 (2003) 153-165
11. Breitung J., and Meyer W. Testing for unit roots in panel data: Are wages on different bargaining levels cointegrated?. Applied Economics 26 (1994) 353-361
12. Breitung J., and Wulff C. Nonlinear error correction and the efficient market hypothesis: the case of dual class shares. German Economic Review 2 (2001) 419-434
13. Caballero R.J. Small sample bias and adjustment costs. Review of Economics and Statistics 76 1 (1994) 52-58
14. Caballero R.J. Aggregate Investment: Lessons from the Previous Millennium, AEA Session/talk (2000), MIT Press, Cambridge, MA
15. Caballero R.J., and Engel E.M.R.A. Microeconomic adjustment hazards and aggregate dynamics. Quarterly Journal of Economics 108 2 (1993) 359-383
16. Caballero R.J., and Engel E.M.R.A. Explaining investment dynamics in U.S. manufacturing: a generalized (S,s) approach. Econometrica 67 (1999) 783-826
17. Caballero R.J., and Engel E.M.R.A. A comment on the economics of labor adjustment: mind the gap: reply. American Economic Review 94 4 (2004) 1238-1244
18. Caballero R.J., Engel E.M.R.A., and Haltiwanger J.C. Plant-level adjustment and aggregate investment dynamics. Brooking Papers on Economic Activity 2 (1995) 1-39
19. Caballero R.J., Engel E.M.R.A., and Haltiwanger J.C. Aggregate employment dynamics: building from microeconomic evidence. American Economic Review 87 1 (1997) 115-137
20. Caggese A. Testing financial constraints on firm investment using variable capital. Journal of Financial Economics 86 (2007) 683-723
21. Calvo G. Staggered prices in a utility-maximizing framework. Journal of Monetary Economics 12 3 (1983) 383-398
22. Carlsson M., and Laséen S. Capital adjustment patterns in Swedish manufacturing: What model do they suggest?. Economic Journal 115 (2005) 969-986
23. Cooper R., and Haltiwanger J. On the nature of capital adjustment costs. Review of Economic Studies 73 (2006) 611-633
24. Cooper, R., Willis, J., 2003. The cost of labor adjustment: inferences from the gap. NBER Working Paper No. 10006.
25. Cooper R., and Willis J. The economics of labor adjustment: mind the gap. American Economic Review 94 4 (2004) 1223-1237
26. Cooper R., Haltiwanger J., and Power L. Machine replacement and the business cycle lumps and bumps. American Economic Review 89 (1999) 921-946
27. Cummins J.G., Hassett K., and Oliner S.D. Investment behavior, observable expectations, and internal funds. American Economic Review 96 3 (2006) 796-810
28. Doms M., and Dunne T. Capital adjustment patterns in manufacturing plants. Review of Economic Dynamics 1 (1998) 409-429
29. Erickson T., and Whited T.M. Measurement error and the relationship between investment and q. Journal of Political Economy 108 (2000) 1027-1057
30. Fazzari S.M., Hubbard R.G., and Petersen B.C. Financing constraints and corporate investment. Brookings Papers on Economic Activity (1988) 141-195
31. Gilchrist, S., Himmelberg, C., 1998. Investment, fundamentals and finance. NBER Macroeconomics Annual.
32. Gomes J.F. Financing investment. American Economic Review 91 (2001) 1263-1285
33. Goolsbee, A., Gross, D.B., 1997. Estimating the form of adjustment costs with data on heterogeneous capital goods. Mimeo, Chicago and NBER Working Paper 6342.
34. Guarglia A. The effects of financial constraints on inventory investment: evidence from a panel of UK firms. Economica 66 (1999) 43-62
35. Hart, O., Moore, J., 1994. A theory of debt based on the inalienability of human capital. Quarterly Journal of Economics CIX, 841-879.
36. Hayashi F. Tobin's marginal q and average q: a neoclassical interpretation. Econometrics 60 (1982) 213-224
37. Holt R.W.P. Investment and dividends under irreversibility and financial constraints. Journal of Economic Dynamics and Control 27 3 (2003) 467-502
38. Hubbard R.G. Capital market imperfections and investment. Journal of Economic Literature 36 (1998) 193-225
39. Kao C., and Chiang M.-H. On the estimation and inference of a cointegrated regression in panel data. Advances in Econometrics 15 (2000) 179-222
40. Kaplan S.N., and Zingales L. Do investment cash-flow sensitivities provide useful measures of financing constraints?. Quarterly Journal of Economics CXII (1997) 167-215
41. Mairesse, J., Hall, B.H., Mulkay, B., 2001. Firm level investment in France and the United States: an exploration of what we have learned in twenty years. In: Herrmann, Heinz, and Rolf Strauch (Eds.), Investing Today for the World of Tomorrow, Springer, Berlin.
42. Merz M., and Yashiv E. Labor market frictions, capital adjustment costs and stock prices. American Economic Review 97 4 (2007) 1419-1431
43. Nielsen A., and Schiantarelli F. Zeros and lumps in investment: empirical evidence on irreversibilities and non-convexities. Review of Economics and Statistics 85 (2003) 1021-1037
44. Phillips P.C.B. Fully modified least squares and vector autoregression. Econometrica 63 (1995) 1023-1078
45. Rotemberg J.J. New Keynesian microfoundations. In: Blanchard O.J., and Fisher S. (Eds). NBER Macroeconomics Annual (1987) 69-104
46. Sargent T.J. Estimation of dynamic labor demand schedules under rational expectations. Journal of Political Economy 86 6 (1978) 1009-1044
47. Tobin J. A general equilibrium approach to monetary theory. Journal of Money, Credit, and Banking 1 (1969) 15-29
48. Whited T.M. External finance constraints and the intertemporal pattern of intermittent investment. Journal of Financial Economics 81 (2006) 467-502