MIT Libraries logoDSpace@MIT

MIT
View Item 
  • DSpace@MIT Home
  • MIT Open Access Articles
  • MIT Open Access Articles
  • View Item
  • DSpace@MIT Home
  • MIT Open Access Articles
  • MIT Open Access Articles
  • View Item
JavaScript is disabled for your browser. Some features of this site may not work without it.

Volatility and Growth: Credit Constraints and the Composition of Investment

Author(s)
Aghion, Philippe; Angeletos, George-Marios; Banerjee, Abhijit; Manova, Kalina
Thumbnail
DownloadAABM-final-web-Volatility.pdf (1.030Mb)
OPEN_ACCESS_POLICY

Open Access Policy

Creative Commons Attribution-Noncommercial-Share Alike

Terms of use
Creative Commons Attribution-Noncommercial-Share Alike http://creativecommons.org/licenses/by-nc-sa/3.0/
Metadata
Show full item record
Abstract
How does uncertainty and credit constraints affect the cyclical composition of investment and thereby volatility and growth? This paper addresses this question within a model where firms engage in two types of investment: a short-term one; and a long-term one, which contributes more to productivity growth. Because it takes longer to complete, long-term investment has a relatively less cyclical return; but it also has a higher liquidity risk. The first effect ensures that the share of long-term investment to total investment is countercyclical when financial markets are perfect; the second implies that this share may turn procyclical when firms face tight credit constraints. A novel propagation mechanism thus emerges: through its effect on the cyclical composition of investment, tighter credit can lead to both higher volatility and lower mean growth. Evidence from a panel of countries provides support for the model's key predictions.
Date issued
2010-02
URI
http://hdl.handle.net/1721.1/52352
Department
Massachusetts Institute of Technology. Department of Economics
Journal
Journal of Monetary Economics
Publisher
Elsevier
Citation
Aghion, Philippe et al. “Volatility and growth: Credit constraints and the composition of investment.” Journal of Monetary Economics In Press, Accepted Manuscript: n. pag.
Version: Author's final manuscript
ISSN
0304-3932

Collections
  • MIT Open Access Articles

Browse

All of DSpaceCommunities & CollectionsBy Issue DateAuthorsTitlesSubjectsThis CollectionBy Issue DateAuthorsTitlesSubjects

My Account

Login

Statistics

OA StatisticsStatistics by CountryStatistics by Department
MIT Libraries
PrivacyPermissionsAccessibilityContact us
MIT
Content created by the MIT Libraries, CC BY-NC unless otherwise noted. Notify us about copyright concerns.