Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/154352
Authors: 
Malamud, Semyon
Zucchi, Francesca
Year of Publication: 
2016
Series/Report no.: 
ECB Working Paper 1919
Abstract: 
We study optimal liquidity management, innovation, and production decisions for a continuum of firms facing financing frictions and the threat of creative destruction. We show that financing constraints lead firms to decrease production but may spur investment in innovation (R&D). We characterize which firms should substitute production for innovation in the face of constraints and thus display a "gambling" type of behavior. We embed our firm dynamics into a model of endogenous growth and show that financing frictions have offsetting effects on economic growth.
Subjects: 
cash management
endogenous growth
financial constraints
innovation
JEL: 
D21
G31
G32
G35
L11
Persistent Identifier of the first edition: 
ISBN: 
978-92-899-2167-1
Document Type: 
Working Paper

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