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Interest Rate Spreads, Credit Constraints, and Investment Fluctuations: An Empirical Investigation / Mark Gertler, R. Glenn Hubbard, Anil Kashyap.
- Format:
- Book
- Author/Creator:
- Gertler, Mark.
- Series:
- Working Paper Series (National Bureau of Economic Research) no. w3495.
- NBER working paper series no. w3495
- Language:
- English
- Physical Description:
- 1 online resource: illustrations (black and white);
- Other Title:
- Interest Rate Spreads, Credit Constraints, and Investment Fluctuations
- Place of Publication:
- Cambridge, Mass. National Bureau of Economic Research 1990.
- Summary:
- We present a simple framework that incorporates a role for "interest rate spreads" in models of investment fluctuations. Formally, we develop a simple model of investment and financial contracting under asymmetric information that can he used to generate an Euler equation describing firms' intertemporal decisions about investment. The Euler equation is than estimated using data on U.S. producers' durable equipment investment. We find that during certain periods -- owing to agency-cost problems -- the basic Euler equation is violated, and shifts in interest rate differentials help predict investment. Thus, the empirical results lend support to models emphasizing how: (i) movements in agency costs of external finance can amplify investment fluctuation, and (ii) changes in the interest rate spread may signal movements in these agency costs.
- Notes:
- Print version record
- October 1990.
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