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Optimal capital stock and financing constraints

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  • Saltari, Enrico
  • Giuseppe, Travaglini

Abstract

In this paper we show that financing constraints affect the optimal level of capital stock even when the financing constraint is ineffective. This happens when the firm rationally anticipates that access to external financing resources may be rationed in the future. We will show that with these expectations, the optimal investment policy is to invest less in any given period, thereby lowering the desired optimal capital stock in the long run.

Suggested Citation

  • Saltari, Enrico & Giuseppe, Travaglini, 2011. "Optimal capital stock and financing constraints," MPRA Paper 35094, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:35094
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    References listed on IDEAS

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    2. E. Saltari & G. Travaglini, 2001. "Financial Constraints and Investment Decisions," Scottish Journal of Political Economy, Scottish Economic Society, vol. 48(3), pages 330-344, August.
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    9. Saltari, Enrico & Travaglini, Giuseppe, 2006. "The effects of future financing constraints on capital accumulation: Some new results on the constrained investment problem," Research in Economics, Elsevier, vol. 60(2), pages 85-96, June.
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    More about this item

    Keywords

    Investment; capital stock; constraints; uncertainty;
    All these keywords.

    JEL classification:

    • E51 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Money Supply; Credit; Money Multipliers
    • E22 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Investment; Capital; Intangible Capital; Capacity
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy

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