Publications
Publications
- Review of Economics and Statistics
Survive Another Day: Using Changes in the Composition of Investments to Measure the Cost of Credit Constraints
By: Luis Garicano and Claudia Steinwender
Abstract
We introduce a novel empirical strategy to measure the size of credit shocks. Theoretically, we show that credit shocks reduce the value of long-term relative to short-term investments. Empirically, we can therefore compare the reduction of long-term relative to short-term investments within firms, allowing for firm-times-year fixed effects. Using Spanish firm-level data, we estimate the credit crunch to be equivalent to an additional tax rate of around 11% on the longest-lived capital. To pin down credit constraints as the underlying cause, we apply triple-differences strategies using foreign ownership or precrisis debt maturity.
Keywords
Credit Constraints; Credit Crunch; Spain; Investment Behavior; Credit Squeeze; Financial Crisis; Economic Growth; Investment; Credit; Manufacturing Industry; Spain; European Union
Citation
Garicano, Luis, and Claudia Steinwender. "Survive Another Day: Using Changes in the Composition of Investments to Measure the Cost of Credit Constraints." Review of Economics and Statistics 98, no. 5 (December 2016): 913–924.