We construct a model of a firm competing for market share in a customer market and making investments in physical capital. The firm is financially constrained and there are implementation lags in investment. Our model predicts that product prices should depend on costs and competitors' prices...

Price and investment equations are estimated using a unique data set for Swedish manufacturing plants. The empirical specification is based on a theoretical model of a financially constrained firm selling its output in a customer market. We find that, as predicted by our theoretical model,...

We construct a model of a financially constrained firm making pricing and investment decisions. The firm operates in a market where customers respond slowly to price changes and there are implementation lags in investment (time to build). Our model implies that the markup over marginal cost is...

Indivisibilities in extending financial markets imply level shifts in the financial cost share. This could induce growth and savings slumps. We search for structural breaks in the financial sector share of seven OECD countries and relate these to changes in GDP growth and the savings share. The...

Using the method of Caballero and Lyons (1990, 1992), I examined detailed Swedish manufacturing firm-level data on output and factor inputs from 1979 through 1994. Panel regressions show that an increase in aggregate output and inputs appears to raise individual firms' production beyond private...