Real Versus Financial Frictions to Capital Investment

We formulate and estimate a structural model of firm investment behavior that specifies the exact channel through which financial frictions bite. The model also allows for the existence of both convex and non-convex costs to adjusting capital. Essentially, we move beyond simply testing and rejecting a neoclassical model without frictions. Our quantitative estimates show that both real and financial frictions have an important effect on firm investment dynamics. JEL Classification: E22

• Publication year

  2005

• Venue

  Social Science Research Network

• Publication date

  2005-12-01

• Fields of study

  Economics

• Identifiers
  DOI 10.2139/ssrn.868439
• External record

  Open on Semantic Scholar

• Source metadata

  Semantic Scholar

• No claims are published for this paper.

• No concepts are published for this paper.

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