NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Capital-Market Imperfections and Investment

R. Glenn Hubbard

NBER Working Paper No. 5996
Issued in April 1997
NBER Program(s):   CF   EFG   ME   PE

Over the past decade, a number of researchers have extended conventional models of business fixed investment to incorporate a role for financial constraints' in determining investment. This paper reviews developments and challenges in this empirical research, and uses advances in models of information and incentive problems to motivate those developments and challenges. First, I describe analytical underpinnings of models of capital-market imperfections in the investment process, and illustrate the principal testable implications of those models. Second, I motivate tests and describe and critique existing empirical studies. Third, the review considers applications of the underlying models to a range of investment activities, including inventory investment, R&D, employment demand, pricing by imperfectly competitive firms, business formation and survival, and risk management. Fourth, I discuss implications of this research program for analysis of effects of investment on monetary policy and tax policy. Finally, I examine some potentially fruitful avenues for future research.

download in pdf format
   (2787 K)

email paper

This paper is available as PDF (2787 K) or via email.

Machine-readable bibliographic record - MARC, RIS, BibTeX

Document Object Identifier (DOI): 10.3386/w5996

Published: Journal of Economic Literature, Vol. 36, no. 1 (March 1998): 193-225.

Users who downloaded this paper also downloaded these:
Obstfeld w6559 The Global Capital Market: Benefactor or Menace?
Claessens, Tong, and Wei w17360 From the Financial Crisis to the Real Economy: Using Firm-level Data to Identify Transmission Channels
Bernanke and Gertler w5146 Inside the Black Box: The Credit Channel of Monetary Policy Transmission
Jorgenson The Theory of Investment Behavior
Kaplan and Zingales w5267 Do Financing Constraints Explain Why Investment is Correlated with Cash Flow?
 
Publications
Activities
Meetings
Data
People
About

Support
National Bureau of Economic Research, 1050 Massachusetts Ave., Cambridge, MA 02138; 617-868-3900; email: info@nber.org

Contact Us