Financing constraints, firm level adjustment of capital and aggregate implications

Following a positive shock, financing constraints will prolong or impede economic expansionthat would have been optimal in an unconstrained environment. The study ofdynamic adjustment therefore offers a direct way of verifying the presence of financingconstraints and assessing their consequences for economic allocation.This paper compares the speed of adjustment of constrained and unconstrained firmsusing categorical information from survey data on the restrictions under which adjustmenttakes place. A set of moment conditions for the use in GMM estimation is developed,to cope with the problem of time varying speed of adjustment when the targetlevel is partially unobserved.After estimating the micro-dynamics of capital demand, I show that the changing compositionof the population makes for a time-varying sensitivity of the aggregate withrespect to macroeconomic shocks.[...]