Quantifying Reduced-Form Evidence on Collateral Constraints

57 Pages Posted: 5 Jun 2016 Last revised: 1 Feb 2018

See all articles by Sylvain Catherine

Sylvain Catherine

University of Pennsylvania - Finance Department

Thomas Chaney

Toulouse School of Economics; University of Chicago - Department of Economics; Centre for Economic Policy Research (CEPR)

Zongbo Huang

The Chinese University of Hong Kong, Shenzhen

David Alexandre Sraer

University of California, Berkeley; Princeton University

David Thesmar

Massachusetts Institute of Technology (MIT) - Economics, Finance, Accounting (EFA)

Date Written: January 31, 2018

Abstract

While a mature literature shows that credit constraints causally affect firm-level investment, this literature provides little guidance to quantify the economic effects implied by these findings. Our paper attempts to fill this gap in two ways. First, we use a structural model of firm dynamics with collateral constraints, and estimate the model to match the firm-level sensitivity of investment to collateral values. We estimate that firms can only pledge about 19% of their collateral value. Second, we embed this model in a general equilibrium framework and estimate that, relative to first-best, collateral constraints are responsible for 11% output losses.

Keywords: Structural model, Financing Constraint, Aggregate Implications

JEL Classification: G32, D92, E10

Suggested Citation

Catherine, Sylvain and Chaney, Thomas and Huang, Zongbo and Sraer, David Alexandre and Thesmar, David, Quantifying Reduced-Form Evidence on Collateral Constraints (January 31, 2018). Available at SSRN: https://ssrn.com/abstract=2631055 or http://dx.doi.org/10.2139/ssrn.2631055

Sylvain Catherine

University of Pennsylvania - Finance Department ( email )

The Wharton School
3620 Locust Walk
Philadelphia, PA 19104
United States

Thomas Chaney

Toulouse School of Economics ( email )

21 allee de Brienne
Toulouse Cedex 6, 31015
France

University of Chicago - Department of Economics ( email )

1126 East 59th Street
Chicago, IL 60637
United States

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

Zongbo Huang

The Chinese University of Hong Kong, Shenzhen ( email )

David Alexandre Sraer

University of California, Berkeley ( email )

310 Barrows Hall
Berkeley, CA 94720
United States

Princeton University ( email )

22 Chambers Street
Princeton, NJ 08544-0708
United States

David Thesmar (Contact Author)

Massachusetts Institute of Technology (MIT) - Economics, Finance, Accounting (EFA) ( email )

77 Massachusetts Avenue
Cambridge, MA 02139-4307
United States
16172259767 (Phone)

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