No abstract

This paper examines the impact of financial constraints on innovation for established firms. We make use of a direct measure of the existence of financial constraints obtained thanks to a specific survey addressed to French established firms. This is a distinctive feature of this paper as most of previous studies had to rely on proxies (like the cash-flow sensitivity), which may be subject to interpretation problems. The probability to have innovative activities and the probability to face financial constraints are simultaneously estimated by a recursive bivariate probit model. Accounting for the endogeneity of the financial constraint variable, we find that financial constraints significantly reduce the likelihood that firms have innovative activities. The probability to encounter financial constraints is explained by firms' ex ante financing structure and economic performances.Innovation, Financing constraints, Recursive bivariate probit,

We study financial literacy in France using the PATER survey and following the Lusardi and Mitchell (2011c) approach. We find that some subpopulations are less financially literate than others: women, young and old people as well as less-educated people are more likely to face difficulties when dealing with fundamental financial concepts such as risk diversification and inflation and interest compounding. We also find some differences in financial knowledge depending on the political opinion of the respondents. Finally we show that these differences in financial knowledge are correlated with differences in the propensity to plan: people who score higher on the financial literacy questions are more likely to be engaged in the preparation of a clearly defined financial plan

Kennickell (Federal Reserve Board) and Peter Tufano (University of Oxford) act as external consultants, and Sébastien Pérez Duarte (ECB) and Jiri Slacalek (ECB) as Secretaries. The HFCN collects household-level data on households' fi nances and consumption in the euro area through a harmonised survey. The HFCN aims at studying in depth the micro-level structural information on euro area households' assets and liabilities. The objectives of the network are: 1) understanding economic behaviour of individual households, developments in aggregate variables and the interactions between the two; 2) evaluating the impact of shocks, policies and institutional changes on household portfolios and other variables; 3) understanding the implications of heterogeneity for aggregate variables; 4) estimating choices of different households and their reaction to economic shocks; 5) building and calibrating realistic economic models incorporating heterogeneous agents; 6) gaining insights into issues such as monetary policy transmission and fi nancial stability. The refereeing process of this paper has been coordinated by a team composed of Gabriel Fagan (ECB), Pirmin Fessler (Oesterreichische Nationalbank),

The paper analyzes the existence and impact of …nancing constraints as a possibly serious obstacle to innovation by …rms. Direct measures of …nancing constraints are employed using survey data collected by the Banque de France and the European Commission, which overcomes the problems with the traditional approach of trying to deduce the existence and impact of …nancing constraints through the significance of …rm wealth variables. The econometric framework employed for this study is the simultaneous bivariate probit with mutual endogeneity. The paper discusses the important identi…cation issue of coherency conditions in such LDV models with endogeneity and ‡exible temporal and contemporaneous correlations in the unobservable error terms. Conditions for coherency as discussed in the existing literature are reviewed and shown to be rather esoteric. Two novel methods for establishing coherency conditions are presented, which have intuitive interpretations. Finally, the paper presents alternative approaches for achieving coherency in models hitherto clas-si…ed as incoherent through the use of prior sign restrictions on model parameters. This allows us to obtain estimates of the interaction between …nancing constraints and a …rm's decision and ability to innovate without forcing the econometric models to be recursive. Thus, direct as well as reverse interaction e¤ects are obtained for the …rst time.