One possible explanation for the European sovereign debt crises is that the European Economic and Monetary Union (EMU) gave rise to consolidation fatigue or even deliberate over‐borrowing. This paper explores the validity of this explanation by studying how three decisive stages in the history...

Financially constrained firms hold more inventory than do financially unconstrained firms and also show more volatility in inventory holdings. To understand why, we model the interaction of financial constraints, capacity constraints, and the response of production and inventory to cost and...