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The focus of this study is on (i) the interaction between financial constraints and capacity restrictions, and (ii) the difference between large and small firms. Using CBI data to provide information on the financial constraints of UK manufacturers, we develop a new identification scheme based on the link between financial constraints and the prevalence and duration of capacity gaps. Two important results emerge: first, financially constrained firms take longer to close capacity gaps; second, small firms close capacity gaps faster than large firms do, but financial constraints seem to be of greater relevance to their adjustment dynamics.

This paper evaluates the consequences of accelerated technical progress for monetary transmission and the speed of adjustment in the real economy. With a decreasing service life, the long term rate relevant to real demand will resemble more closely the money market rate. We make the investment decision explicitly dependent on a long-term rate for a credit contract of finite maturity. This, along with perfect foresight, leads to a differentialdifference equation for the dynamics of transmission, which is new to the economics literature. Our analysis shows that a reduced service life of capital leads to an increased speed of adjustment of the real sector, which goes along with a reduced volatility of the exchange rate. Wherereas the interest channel becomes stronger, the exchange-rate channel loses importance. The grip of monetary policy becomes more direct: while demand will react more sharply at the beginning, the transmission process will be completed earlier. All in all, our answers as to the feasibility of monetary policy and the stability of the financial system are rather optimistic. ; Diese Arbeit untersucht die Folgen eines beschleunigten technischen Fortschritts für die monetäre Transmission und die Anpassung auf den Gütermärkten. Mit abnehmender Kapitalnutzungsdauer wird der für die aggregierte Nachfrage relevante langfristige Zins dem Geldmarktzins ähnlicher. Wir betrachten die Investitionsentscheidung in Abhängigkeit von einem langfristigen Zinssatz bezüglich eines Kreditvertrags mit beschränkter Laufzeit. Dies, gemeinsam mit perfekter Voraussicht, führt zu einer neuartigen Differenzen- Differentialgleichung für den Transmissionsprozess. Unsere Untersuchung zeigt, daß eine abnehmende Kapitalnutzungsdauer zu einer erhöhten Anpassungsgeschwindigkeit auf den Gütermärkten führt, was eine verminderte Volatilität auf den Devisenmärkten bedingt. Während der Zinskanal stärker wird, verliert der Wechselkurskanal an Gewicht. Die geldpolitische Wirkung wird direkter: Zu Beginn reagiert die Nachfrage stärker, und der Transmissionspozeß ist früher abgeschlossen. Insgesamt sind unsere Ergebnisse bezüglich geldpolitischer Kontrolle und Stabilität der Finanzmärkte recht optimistisch.

We propose a method for indentifying discretionary fiscal policy with real time data. The starting point is the observation that automatic stabilizers should depend on true GDP, while discretionary fiscal policy depends on the information that policy makers have in real time. We approximate the information set of policy makers with GDP data released in real time. True GDP is approximated using the last GDP release. Accordingly, we can compute a real time measurement error. Discretionary fiscal policy can be expected to react to this measurement error, whereas automatic fiscal policy will not. We apply this identification approach in order to test the central identifying assumption of Blanchard and Perotti's (2002) seminal structural VAR. According to this assumption, fiscal policy makers do not react to GDP evolutions contemporaneously in a discretionary fashion. We find that government expenditure is adjusted upward if GDP in real time is lower than true GDP. This suggests that fiscal policy makers can use short-term funds to buy goods and services in response to GDP updates. Our results therefore call the identifying assumption of Blanchard and Perotti's (2002) SVAR into question.