| The main concern of this research is to investigate the effect of credit rationing on investment. Many studies have been carried on credit rationing, but an unsolved controversy remains. To what extent credit rationing is binding to the whole economy and not just the small business sector?; This research empirically estimated and quantified the effects of bank credit and credit rationing on private investment expenditures, specifically on plant and equipment in the U.S. economy. Among all the components of the macroeconomy, investment is chosen because of the impact of future production capabilities on the economy and the standard of living.; A disequilibrium model of demand and supply of credit of the U.S. economy was used to build an excess demand variable. This model is the most appropriate because in this model is not necessary for the interest rate to adjust fully, the market does not always clear in the typical sense, in which demand equal supply. This variable was tested for significance on investment within the context of the modified neoclassical model.; The modified neoclassical model contains both real and financial variables. Therefore, a test with this model will not be redundant on the financial side. And on the other side there is no risk of just improving the fit of a model that only contains real variables by adding a financial variable.; The specification used represents Bischoff's model of expenditures on Producers Durable Equipment that is a simplified version of one laid out by Bischoff (1971) and Ando, Modigliani, Rasche and Turnovsky (1974). This model has been extensively tested in a slightly more general version and has stood up very well. Also, in this specification there is only short run equilibrium.; In conclusion this research provided evidence of the macroeconomics dimension of credit rationing. Credit rationing does have a real impact on investment. It was possible to empirically estimate and quantify the effects of credit rationing on investment expenditures. This research confirms that there is an empirical relationship at the aggregate level between credit as financial constraint and investment. There is no redistribution effect. The lack of credit by banks is not outweighed by trade credit specially from large to small firms. |
