The Effects of Macroprudential Policies on Research and Development Expenditure - A System GMM Approach

Sammanfattning

Preliminary firm level evidence suggests that macroprudential policies reduce firm credit growth and MSME investment, and could therefore have a negative impact on economic growth. However, the question remains if macroprudential policies affect R\&D investments as well. Although R&D is primarily financed internally, the literature also suggests that debt financing may be used to some degree depending on firm and country characteristics. Furthermore, implementation of macroprudential policies may also affect R&D indirectly by reducing access to external finance for other investments, compelling firms to deprioritize R&D in their use of internal funds. This study is a first attempt to investigate the effects of borrower-targeted macroprudential policies on research and development expenditures. We estimate a dynamic panel model of R&D financing using a system GMM approach on a heterogeneous sample of European firm level data. Our results indicate that implementation and tightening of borrower-targeted macroprudential policies is associated with lower R&D expenditures for MSMEs and unlisted firms. No evidence is found that these policies affect large and listed firms.