Investment, financing constraints and profit expectations: new macro evidence¹

¹ This work was carried out while Marine Diron was working at the European Central Bank in the Euro Area Macroeconomic Developments Division.

Abstract

Regression results show that the external financing costs, the financing gap and profit expectations significantly matter for US and euro area aggregate (nonconstruction) investment. This finding supports the view that external and internal financing constraints hamper investment also at the macro level.

Acknowledgements

The usual disclaimer applies. We thank Luci Ellis and Philip Vermeulen for comments.

Notes

¹ This work was carried out while Marine Diron was working at the European Central Bank in the Euro Area Macroeconomic Developments Division.