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Interest Rate Puzzles, Competitive Theory and Capital Constraints

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Book cover Economics in a Changing World

Part of the book series: International Economic Association Series ((IEA))

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Abstract

Much has been written in recent years concerning the problem of reconciling observed patterns of real wages with competitive equilibrium theory. The failure of real product wages to rise in economic downturns suggests that firms are off their supply curves;1 and the failure of real consumer wages to fall substantially suggests that workers are off their labour supply curves.

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References

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    Google Scholar 

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    Google Scholar 

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    Google Scholar 

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    Google Scholar 

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    Google Scholar 

  • Myers, S. and Majluf, N. (1984) ‘Corporate Financing and Investment Decisions When Firms Have Information that Investors do Not Have’, Journal of Financial Economics, vol. 13, pp. 187–221.

    Google Scholar 

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    Google Scholar 

  • Rodriguez, A., Stiglitz, J. E. and Weiss, A. (1992) ‘Adverse Selection, Credit Rationing, Central Bank Policy’, Stanford University, Working Paper.

    Google Scholar 

  • Sah, R. and Stiglitz, J. E. (1989) ‘Sources of Technological Divergence between Developed and Less Developed Countries’, in G. Calvo et al. (eds), Debt, Stabilization and Development: Essays in Memory of Carlos Diaz-Alejandro (Oxford: Basil Blackwell).

    Google Scholar 

  • Shell, K., Sidrauski, M. and Stiglitz, J. E. (1969) ‘Capital Gains, Income and Savings’, Review of Economic Studies, vol. 36 (January), pp. 15–26.

    Google Scholar 

  • Sidrauski, M. (1967a) ‘Rational Choice and Patterns of Growth in a Monetary Economy’, American Economic Review, vol. 58 (May), pp. 534–44.

    Google Scholar 

  • Sidrauski, M. (1967b) ‘Inflation and Economic Growth’, Journal of Political Economy, vol. 75 (December), pp. 796–810.

    Google Scholar 

  • Stiglitz, J. E. (1973) ‘Taxation, Corporate Financial Policy and the Cost of Capital’, Journal of Public Economics, vol. 2 (February), pp. 1–34.

    Google Scholar 

  • Stiglitz, J. E. (1981a) ‘Ownership, Control and Efficient Markets: Some Paradoxes in the Theory of Capital Markets’, in Boyer, K. D. and Shepherd, W. G. (eds), Economic Regulation: Essays in Honor of James R. Nelson (Ann Arbor, Michigan: Michigan State University Press), pp. 311–41.

    Google Scholar 

  • Stiglitz, J. E. (1981b) ‘On the Almost Neutrality of Inflation: Notes on Taxation and the Welfare Costs of Inflation’, in Flanders, M. J. and Razin, A. (eds), Development in an Inflationary World (New York: Academic Press), pp. 419–57.

    Google Scholar 

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    Google Scholar 

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    Google Scholar 

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    Google Scholar 

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    Google Scholar 

  • Stiglitz, J. E. (1988a) ‘On the Relevance or Irrelevance of Public Financial Policy’, in Arrow, K. J. and Boskin, M. J. (eds), The Economics of Public Debt (proceedings of the 1986 International Economic Association Conference, Stanford) (London: Macmillan), pp. 41–76.

    Google Scholar 

  • Stiglitz, J. E. (1988b) ‘Money, Credit and Business Fluctuations’, Economic Record (December), pp. 307–22; reprinted as ‘Dinero, Crédito y Fluctuaciones Económicas, Revista de Economia, Banco Central del Uruguay, vol. 3, no. 3 (April 1989).

    Google Scholar 

  • Stiglitz, J. E. (1989) ‘Mutual Funds, Capital Structure, and Economic Efficiency’, in Bhattacharya, S. and Constantinides, G. (eds), Theory of Valuation — Frontiers of Modern Financial Theory, Vol. 1 (Totowa, New Jersey:

    Google Scholar 

  • Abel, A. B. and Blanchard, O. J. (1986) ‘The Present Value of Profits and Cyclical Movements in Investments’, Econometrica, vol. 54, pp. 249–74.

    Article  Google Scholar 

  • Asquith, P. and Mullins, D. W. (1986) ‘Equity Issues and Stock Price Dilution’, Journal of Financial Economics, vol. 13, pp. 296–320.

    Google Scholar 

  • Bagwell, L. S. and Shoven, J. B. (1990) ‘Cash Distributions to Shareholders’, Journal of Economic Perspectives, vol. 3, no. 3, pp. 129–40.

    Article  Google Scholar 

  • Bester, H. (1985) ‘Screening Versus Rationing in Credit Markets with Imperfect Information’, American Economic Review, vol. 75, pp. 850–5.

    Google Scholar 

  • Calomiris, C. W. and Hubbard, R. G. (1987) ‘Price Flexibility, Credit Availability and Economic Fluctuations: Evidence from the US: 1879–1914’, Northwestern University.

    Google Scholar 

  • Calomiris, C. W., Hubbard, R. G. and Stock, J. H. (1986) ‘The Farm Debt Crisis and Public Policy’, Brookings Papers on Economic Activity, no. 2, pp. 441–79.

    Article  Google Scholar 

  • Devereux, M. and Schiantarelli, F. (1990) ‘Investment, Financial Factors, and Cash Flow: Evidence from UK Panel Data’, in Hubbard, G. (ed.), Information, Capital Markets and Investment, (Chicago: University of Chicago Press).

    Google Scholar 

  • Diamond, P. (1967) ‘The Role of a Stock Market in a General Equilibrium Model with Technological Uncertainty’, American Economic Review, vol. 57 (September), pp. 759–76.

    Google Scholar 

  • Fazzari, S., Hubbard, G. and Peterson, B. (1988) ‘Financing Constraints and Corporate Investment’, Brookings Papers on Economic Activity, no. 1, pp. 141–206.

    Article  Google Scholar 

  • Galeotti, M., Jaramillo, F. and Schiantarelli, F. (1990) ‘Investment Decisions and the Role of Debt, Liquid Assets and Cash Flow: Evidence from Italian Panel Data’, Boston University Working Paper (March).

    Google Scholar 

  • Gilchrist, S. (1989) ‘An Empirical Analysis of Corporate Investment and Financing Hierarchies Using Firm Level Panel Data’, (Madison, Wisconsin: University of Wisconsin), mimeo.

    Google Scholar 

  • Greenwald, B. C. and Stiglitz, J. E. (1988) ‘Examining Alternative Macroeconomic Theories’, Brookings Papers on Economic Activity, No. 1, pp. 207–270 (subsequently reprinted in Recent Developments in Macroeconomics, ed. Edmund Phelps and Edward Elgar).

    Google Scholar 

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    Google Scholar 

  • Greenwald, B. C. and Stiglitz, J. E. (1990b) ‘Asymmetric Information and the New Theory of the Firm: Financial Constraints and Risk Behavior’, American Economic Review, vol. 80, no. 2 (May), pp. 160–5.

    Google Scholar 

  • Greenwald, B. C. and Stiglitz, J. E. (1991) ‘Towards a Reformulation of Monetary Economics’, Caffee Lectures presented to the University of Rome and the Bank of Italy, 1991 (Cambridge: Cambridge University Press, 1992).

    Google Scholar 

  • Greenwald, B. C. and Stiglitz, J. E. (1993) ‘Financial Market Imperfections and Business Cycles’, Quarterly Journal of Economics, vol. 108, no. 1, pp. 77–114.

    Article  Google Scholar 

  • Greenwald, B. C., Stiglitz, J. E. and Weiss, A. (1984) ‘Informational Imperfections in the Capital Markets and Macroeconomic Fluctuations’, American Economic Review, vol. 74, no. 2 (May), pp. 194–9.

    Google Scholar 

  • Hoshi, T., Kashyap, A. and Scharfstein, D. (1988) ‘Corporate Structure and Investment: Evidence from Japanese Panel Data’, MIT Sloan School of Management, Working Paper, pp. 2071–88.

    Google Scholar 

  • Hoshi, T., Kashyap, A. and Scharfstein, D. (1991) ‘Corporate Structure, Liquidity, and Investments: Evidence from Japanese Industrial Groups’, Quarterly Journal of Economics, vol. 106 (February), pp. 33–59.

    Article  Google Scholar 

  • Hubbard, R. G. and Kashyap, A. (1989) ‘Internal New Worth and the Investment Process: An Application of US Agriculture, 1910–1987’, mimeo.

    Google Scholar 

  • Jaffee, D. and Stiglitz, J. E. (1990) ‘Credit Rationing’, in Friedman, B. and Hahn, F. (eds), Handbook of Monetary Economics (Amsterdam: Elsevier), pp. 837–88.

    Google Scholar 

  • Jensen, M. (1986) ‘Agency Costs of Free Cash Flow, Corporate Finance and Takeovers’, American Economic Review, vol. 76, no. 2 (May), pp. 323–9.

    Google Scholar 

  • Johnson, H. G. (1966) ‘The Neo-Classical One-Sector Growth Model: A Geometrical Exposition and Extension to a Monetary Economy’, Economica, vol. 33 (August), pp. 265–87.

    Google Scholar 

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    Article  Google Scholar 

  • McCurdy, T. E. and Shoven, J. B. (1992a) ‘Stocks, Bonds, and Pension Wealth’, in Wise, D. A. (ed.), Topics in the Economics of Aging (Chicago: NBER/University of Chicago Press), pp. 61–78.

    Google Scholar 

  • McCurdy, T. E. and Shoven, J. B. (1992b) Accumulating Pension Wealth with Stocks and Bonds’, CEPR/Stanford University, unpublished mimeo.

    Google Scholar 

  • McCurdy, T. E. and Shoven, J. B. (1992c) ‘Do Long Term Bonds Pay Off?’, CEPR/Stanford University, unpublished mimeo.

    Google Scholar 

  • Mayer, C. (1990) ‘Financial Systems, Corporate Finance, and Economic Development’, in Hubbard, R. G. (ed.), Asymmetric Information, Corporate Finance, and Investment (Chicago: University of Chicago Press).

    Google Scholar 

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    Google Scholar 

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    Article  Google Scholar 

  • Newbery, D. and Stiglitz, J. E. (1987) ‘Wage Rigidity, Implicit Contracts, Unemployment and Economic Efficiency’, Economic Journal, vol. 97, no. 386 (June), pp. 416–30.

    Article  Google Scholar 

  • Rodriguez, A., Stiglitz, J. E. and Weiss, A. (1992) ‘Adverse Selection, Credit Rationing, Central Bank Policy’, Stanford University, Working Paper.

    Google Scholar 

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    Google Scholar 

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    Article  Google Scholar 

  • Sidrauski, M. (1967a) ‘Rational Choice and Patterns of Growth in a Monetary Economy’, American Economic Review, vol. 58 (May), pp. 534–44.

    Google Scholar 

  • Sidrauski, M. (1967b) ‘Inflation and Economic Growth’, Journal of Political Economy, vol. 75 (December), pp. 796–810.

    Article  Google Scholar 

  • Stiglitz, J. E. (1973) ‘Taxation, Corporate Financial Policy and the Cost of Capital’, Journal of Public Economics, vol. 2 (February), pp. 1–34.

    Google Scholar 

  • Stiglitz, J. E. (1981a) ‘Ownership, Control and Efficient Markets: Some Paradoxes in the Theory of Capital Markets’, in Boyer, K. D. and Shepherd, W. G. (eds), Economic Regulation: Essays in Honor of James R. Nelson (Ann Arbor, Michigan: Michigan State University Press), pp. 311–41.

    Google Scholar 

  • Stiglitz, J. E. (1981b) ‘On the Almost Neutrality of Inflation: Notes on Taxation and the Welfare Costs of Inflation’, in Flanders, M. J. and Razin, A. (eds), Development in an Inflationary World (New York: Academic Press), pp. 419–57.

    Google Scholar 

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    Google Scholar 

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    Google Scholar 

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    Article  Google Scholar 

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    Google Scholar 

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    Google Scholar 

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    Google Scholar 

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Author information

Authors and Affiliations

  1. Stanford University, USA

    Joseph E. Stiglitz

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  1. Joseph E. Stiglitz
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Editor information

Editors and Affiliations

  1. Institut d’Études Politique, Paris, France

    Jean-Paul Fitoussi

  2. Observatoire Français des Conjonctures Économiques, and IEA, Paris, France

    Jean-Paul Fitoussi

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© 1995 International Economic Association

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Stiglitz, J.E. (1995). Interest Rate Puzzles, Competitive Theory and Capital Constraints. In: Fitoussi, JP. (eds) Economics in a Changing World. International Economic Association Series. Palgrave Macmillan, London. https://doi.org/10.1007/978-1-349-23953-5_7

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