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@techreport{NBERw19946,
 title = "Maturity Rationing and Collective Short-Termism",
 author = "Milbradt, Konstantin and Oehmke, Martin",
 institution = "National Bureau of Economic Research",
 type = "Working Paper",
 series = "Working Paper Series",
 number = "19946",
 year = "2014",
 month = "February",
 doi = {10.3386/w19946},
 URL = "http://www.nber.org/papers/w19946",
 abstract = {Financing terms and investment decisions are jointly determined. This interdependence links firms' asset and liability sides and can lead to short-termism in investment. In our model, financing frictions increase with the investment horizon, such that financing for long-term projects is relatively expensive and potentially rationed. In response, firms whose first-best investment opportunities are long-term may change their investments towards second-best projects of shorter maturities. This worsens financing terms for firms with shorter maturity projects, inducing them to change their investments as well. In equilibrium, investment is inefficiently short-term. Equilibrium asset-side adjustments by firms can amplify shocks and, while privately optimal, can be socially undesirable.},
}