Financial Constraints, Productivity, and Investment: Evidence from Lithuania

Download or read book Financial Constraints, Productivity, and Investment: Evidence from Lithuania written by Karim Foda and published by International Monetary Fund. This book was released on 2022-12-09 with total page 26 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper studies the relation between firms' access to finance, labor productivity and investment using Lithuanian firm-level data from 2000–2018. To do so, we construct a measure of financial constraints. We estimate that, given firm characteristics, removing these constraints can improve average productivity and investment of firms in Lithuania by 0.51 percent and 7.2 percent, respectively. Our results further suggest that policies targeting firm age and size together will be more effective in mitigating the impact of financial constraints as the relationship between firm age and size with financial constraints exhibits non-linearities.