This paper studies the macroeconomic implications of firms' investment composition choices in the presence of credit constraints. Following a negative and persistent aggregate productivity shock, firms shift into short-term investments because they produce more pledgeable output and because they help alleviate future borrowing constraints. This produces a short-run dampening of the effects of the shock, at the expense of lower long-term investment and future output, relative to an economy with no credit market imperfections. The effects are exacerbated by a steepening of the term structure of interest rates that further encourages a shift towards short-term investments in the short-run. Small temporary shocks to the severity of financing frictions generate large and long-lasting effects on output through their impact on the composition of investment. A positive financial shock produces much stronger effects than an identical negative shock, while the responses to positive and negative shocks to aggregate productivity are roughly symmetric. Finally, the paper introduces a novel explanation for the countercyclicality of financing constraints of firms.

Credit Constraints, Firms' Precautionary Investment, and the Business Cycle

Developing a capital investment and finance decision tree for alternative energy resources at a vegetable farm

In modern agriculture with its technical needs, it is almost impossible without effective management measures and borrowing capital. Stable development of agriculture, including crop production, certainly depends on technical equipment of agricultural enterprises. The use of financial instruments and management mechanisms is an opportunity for agricultural producers to improve their potential, including the improvement and maintenance of agricultural equipment at an appropriate level, since the activity involves in the performance of a large volume of mechanized work for the production of strategically important products. The aim of the article is to justify the theoretical provisions and to develop the mechanism of management decision making on the use of leasing in the activity of agricultural organizations. The objectives of the research: to analyze the material and technical support of agricultural organizations of the Republic of Tatarstan; based on the use of sociological methods of research to propose an algorithm for determining the variant of the form of financing capital investment, which is based on the choice of alternative options for the reproduction of machine and tractor fleet. The proposed mechanism for making managerial decisions on the use of leasing in the activities of agricultural organizations contributes to improving the efficiency of the production system and provides renewal and formation of technical and technological potential of the industry.

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Development of a mechanism for making administrative decisions on the use of leasing

This paper seeks to analyze the impact of agricultural investments on economic growth in rural communities in Romania. It answers the question: are the investments in agriculture a determinant of economic growth in rural communities, and if yes, what is their impact on economic growth? The objectives are to identify, through linear regression models, the intensity and meaning of the relationships between the value of investments and the main indicators that can express economic growth in rural areas. In this purpose, the level of relationships between the value of investments in agriculture and the value of GDP in predominantly rural areas, the value of GDP in agriculture and the value of the agricultural production are analyzed. The main results show that the variables chosen are inﬂuenced by the value of the investments in different proportions, so the hypothesis that investment in agriculture has a positive and medium impact on rural economic growth is true. The most significant relationship is obtained between the value of agricultural investments and the value of agricultural production.

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The impacts of the investments in agriculture on economic growth in rural communities in romania

This paper addresses the interdependences between Italian firms’ access to finance and their probability of default, over the period 2005 to 2011. From a theoretical point of view, an increased default probability limits the firms’ access to bank loans. At the same time, a high indebtedness rate increases their risk of default. Therefore, in order to shed light on this nexus, we use a VAR specification and a large dataset including 143,000 Italian firms. We document a bidirectional causality between the bank loans to sales ratio and the Altman Z-score used as proxy for the probability of default. However, even if we find no clear evidence in the favour of the indebtedness effect or financing effect, we show that an increased probability of default does not limit the Italian firms’ access to bank loans, on the contrary.

Dan Pascu

Papers

Cash Flow and Investment Decision: An Application on the Romanian Agriculture Sector