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035 $a(OCoLC)60569691
040 $aMYG$cMYG
090 $aHB31.M415 no.05-15
245 00 $aVolatility & growth :$bcredit constraints and productivity-- enhancing investment /$c[by] Philippe Aghion ... [et al.].
246 3 $aVolatility and growth :$bcredit constraints and productivity-- enhancing investment
260 $aCambridge, MA :$bMassachusetts Institute of Technology, Dept. of Economics,$c[2005]
300 $a24, [7] p. :$bill. ;$c28 cm.
490 1 $aWorking paper series / Massachusetts Institute of Technology, Dept. of Economics ;$vworking paper 05-15
500 $a"April 30, 2005."
504 $aIncludes bibliographical references (p. 21-24).
520 3 $aWe examine how credit constraints affect the cyclical behavior of productivity-enhancing investment and thereby volatility and growth. We first develop a simple growth model where firms engage in two types of investment: a short-term one and a long-term productivity-enhancing one. Because it takes longer to complete, long-term investment has a relatively less procyclical return but also a higher liquidity risk. Under complete financial markets, long-term investment is countercyclical, thus mitigating volatility. But when firms face tight credit constraints, long-term investment turns procyclical, thus amplifying volatility. Tighter credit therefore leads to both higher aggregate volatility and lower mean growth for a given total investment rate. We next confront the model with a panel of countries over the period 1960-2000 and find that a lower degree of financial development predicts a higher sensitivity of both the composition of investment and mean growth to exogenous shocks, as well as a stronger negative effect of volatility on growth. Keywords: Growth, fluctuations, business cycle, credit constraints, amplification, R&D. JEL Classifications: E22, E32, O16, O30, O41, O57.
530 $aAbstract in HTML and working paper for download in PDF available via World Wide Web at the Social Science Research Network.
650 0 $aInvestments$xEconometric models.
700 1 $aAghion, Philippe.
710 2 $aMassachusetts Institute of Technology.$bDept. of Economics.
830 0 $aWorking paper (Massachusetts Institute of Technology. Dept. of Economics) ;$vno. 05-15.
856 41 $uhttp://ssrn.com/abstract=719772$zTo download paper, go to the bottom of the abstract page and choose a download option.
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