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The Effect of U.S. Economic Policies on the Rate of Business Failure

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  • Ronald C. Clute
  • George B. Garman

Abstract

Using 92 quarters of data, the authors attempt to determine if federal government economic policies are the cause of unexplained variations in the rate of business failure. The three policy variables, money supply, volume of bank loans, and interest rates are investigated with a Cochran-Orcutt regression model utilizing lagged explanatory variables. The authors conclude that variations in the money supply and the volume of bank loans have an inverse, lagged effect on the rate of business failure. A statistically significant relationship was not established for interest rates.

Suggested Citation

  • Ronald C. Clute & George B. Garman, 1980. "The Effect of U.S. Economic Policies on the Rate of Business Failure," Entrepreneurship Theory and Practice, , vol. 5(1), pages 6-12, July.
    • Handle: RePEc:sae:entthe:v:5:y:1980:i:1:p:6-12
    DOI: 10.1177/104225878000500103
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    References listed on IDEAS

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    1. Donald R. Hodgman, 1960. "Credit Risk and Credit Rationing," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 74(2), pages 258-278.
    2. Tanner, J. Ernest, 1979. "Are the lags in the effects of monetary policy variable?," Journal of Monetary Economics, Elsevier, vol. 5(1), pages 105-121, January.
    3. C. F. Charles, 1979. "Effects of Tight Money Policy on the Availability of Bank Loans to Small Businesses," Entrepreneurship Theory and Practice, , vol. 4(1), pages 22-30, July.
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    Cited by:

    1. Philip D. Olson, 1985. "Entrepreneurship: Process and Abilities," Entrepreneurship Theory and Practice, , vol. 10(1), pages 25-31, July.

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