Article ID Journal Published Year Pages File Type
5101544 Journal of Monetary Economics 2016 18 Pages PDF
Abstract
US data display aggregate external financing and savings waves. Firms can allocate costly external finance to productive capital, or to liquid assets with low physical returns. If firms raise costly external finance and accumulate liquidity, either the cost of external finance is relatively low or the total return to liquidity accumulation, including its shadow value as future internal funds, is particularly high. We formalize this intuition by estimating a dynamic model of firms׳ financing and savings decisions, and use our model along with firm level data to construct an empirical estimate of the average cost of external finance from 1980 to 2014.
Related Topics
Social Sciences and Humanities Economics, Econometrics and Finance Economics and Econometrics
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