Financial constraints on R&D projects and minsky moments: containing the credit cycle Articles uri icon

authors

  • LABORDA HERRERO, JUAN
  • Salas, Vicente
  • SUAREZ GALVEZ, CRISTINA

publication date

  • September 2021

start page

  • 1089

end page

  • 1111

issue

  • 4

volume

  • 31

International Standard Serial Number (ISSN)

  • 0936-9937

Electronic International Standard Serial Number (EISSN)

  • 1432-1386

abstract

  • This paper tests Minsky's financial instability hypothesis (FIH) for a panel of Spanish manufacturing firms. We find that the probability of a firm being financially constrained externally in terms of undertaking innovation projects moves inversely with the business and credit cycle, which is consistent with Minsky's FIH. We provide evidence that the credit and business cycles strengthen each other. These results highlight the importance of implementing polices designed to contain the financial cycle.

subjects

  • Economics

keywords

  • business cycle; credit cycle; financial constraints; financial instability hypothesis; r&d