Quantifying Reduced‐Form Evidence on Collateral Constraints

This paper quantifies the aggregate effects of financing constraints. We start from a standard dynamic investment model with collateral In contrast to existing quantitative literature, our estimation does not target mean leverage ratio identify scope frictions. Instead, we use reduced-form coefficient recent corporate finance literature that connects exogenous debt capacity shocks investment. Relative frictionless benchmark, constraints induce losses 7.1% for output and 1.4% total factor productivity (TFP) (misallocation). show these estimated tend be more robust misspecification than estimates obtained by targeting leverage.