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Financial constraints on R&D projects and minsky moments: containing the credit cycle

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Abstract

This paper tests Minsky’s financial instability hypothesis (FIH) for a panel of Spanish manufacturing firms. We find that the probability of a firm being financially constrained externally in terms of undertaking innovation projects moves inversely with the business and credit cycle, which is consistent with Minsky’s FIH. We provide evidence that the credit and business cycles strengthen each other. These results highlight the importance of implementing polices designed to contain the financial cycle.

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Authors and Affiliations

  1. Department of Business Administration, Universidad Carlos III, Madrid, Spain

    Juan Laborda

  2. Department of Business Administration and Organization, Universidad de Zaragoza, Zaragoza, Spain

    Vicente Salas

  3. Department of Economics, Universidad de Alcalá, Alcalá de Henares, Madrid, Spain

    Cristina Suárez

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  1. Juan Laborda
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  2. Vicente Salas
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  3. Cristina Suárez
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Correspondence to Cristina Suárez.

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Laborda, J., Salas, V. & Suárez, C. Financial constraints on R&D projects and minsky moments: containing the credit cycle. J Evol Econ 31, 1089–1111 (2021). https://doi.org/10.1007/s00191-021-00721-y

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