- 22 December 2005
- WORKING PAPER SERIES - No. 566Details
- 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 Code
- E22 : Macroeconomics and Monetary Economics→Consumption, Saving, Production, Investment, Labor Markets, and Informal Economy→Capital, Investment, Capacity