Financial Constraints and Capacity Adjustment: Evidence from a Large Panel of Survey Data

34 Pages Posted: 12 Oct 2006  

Ulf von Kalckreuth

Deutsche Bundesbank - Economic Research Centre

Abstract

The focus of this study is on (i) the interaction between financial constraints and capacity restrictions, and (ii) the difference between large and small firms. Using CBI data to provide information on the financial constraints of UK manufacturers, we develop a new identification scheme based on the link between financial constraints and the prevalence and duration of capacity gaps. Two important results emerge: first, financially constrained firms take longer to close capacity gaps; second, small firms close capacity gaps faster than large firms do, but financial constraints seem to be of greater relevance to their adjustment dynamics.

Suggested Citation

von Kalckreuth, Ulf, Financial Constraints and Capacity Adjustment: Evidence from a Large Panel of Survey Data. Economica, Vol. 73, No. 292, pp. 691-724, November 2006. Available at SSRN: https://ssrn.com/abstract=936463 or http://dx.doi.org/10.1111/j.1468-0335.2006.00514.x

Ulf Von Kalckreuth (Contact Author)

Deutsche Bundesbank - Economic Research Centre ( email )

Wilhelm-Epstein-Strasse 14
Frankfurt/Main D-60431
Germany

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