2024-03-29T09:52:20Zhttps://repositorio.bde.es/oai/requestoai:repositorio.bde.es:123456789/69662023-12-21T11:48:11Zcom_123456789_5661com_123456789_21col_123456789_5689
Repositorio Institucional
author
Arce, Óscar
author
Campa, José Manuel
author
Gavilán, Ángel
2019-08-10T17:53:13Z
2019-08-10T17:53:13Z
2009-02-17
ISSN: 0213-2710 (en papel)
https://repositorio.bde.es/handle/123456789/6966
000221157
DTRA-200837-eng
This paper studies how investment and production in an economy is allocated across sectors when they face asymmetric financial conditions. Namely, when investors in one sector may run projects with higher loan-to-values than in another sector. Investors decide where to invest based on total rents and face a trade-off. While they may run larger projects in the sector with the best financial conditions, unit rents in this sector are lower than in the other sector due to a pledgeability premium. The level of interest rates affects this trade-off and therefore investors' endogenous segmentation across sectors. The effect is non-monotonic. When interest rates are high, projects are small and the differences in unit rents across sectors dominate the differences in project sizes. In this case, a drop in interest rates, move investors toward the most productive sector. Instead, when interest rates are low, projects are large, but much larger in the sector with the best financial conditions. In this case, the differences in project sizes across sectors dominate the differences in unit rents and a drop in interest rates moves investors towards the least productive sector but with the best access to external funding. We find that this hump-shaped relationship between interest rates and the share of investors allocated to a given sector may translate into a similar hump-shaped relationship between interest rates and the ratio of aggregate investment across sectors. Instead, in a model without financial asymmetries across sectors both relationships are monotonic and do not exhibit a hump. We claim that this paper provides helpful insights to understand the pattern of sectoral reallocation of investment and production observed in some OECD countries recently
eng
Reconocimiento-NoComercial-CompartirIgual 4.0 Internacional (CC BY-NC-SA 4.0)
Investment and credit
Pledgeability premium
Collateral constraints
Sectoral allocation
Housing
Asymmetric collateral requirements and output composition
Documento de trabajo
URL
https://repositorio.bde.es/bitstream/123456789/6966/1/dt0837e.pdf
File
MD5
38eb4f9a08411316fac2fabce73a8a9e
850502
application/pdf
dt0837e.pdf
URL
https://repositorio.bde.es/bitstream/123456789/6966/2/dt0837e.pdf.txt
File
MD5
7e491cb76b74c21ebbdc23f65c3c7833
16562
text/plain
dt0837e.pdf.txt