{
  "title": "K Wasn’t Built in a Day",
  "publication": "IMF Working Papers, April 11, 2025",
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  "summary": "Physical capital takes time to build. Yet, the measurement of time to build and of its response to firm behavior remain scant. We fill this gap using project-level data from India.",
  "sections": [
    {
      "heading": "Summary",
      "content": "- Physical capital takes time to build; measurement of time to build and its response to firm behavior are scant.\n- This study uses project-level data from India to document cross-sectional heterogeneity in time to build and to identify causal effects of credit supply shocks on project timing.\n- Key behavioral response: when credit dries up, firms accelerate ongoing projects and start fewer new projects.\n- A novel model of endogenous time to build rationalizes these facts and quantifies the implications for investment dynamics and policy."
    },
    {
      "heading": "Data and Identification",
      "content": "- Data: project-level data from India (project costs and gestation lags).\n- Identification: exploit quasi-experimental variation in credit supply to establish causal effects of credit shocks on project timing.\n- Empirical regularity: projects proxied to be more mature are sped up the most when credit tightens."
    },
    {
      "heading": "Main Findings",
      "content": "- Firms accelerate ongoing projects and postpone unbegun projects in response to a credit crunch.\n- Cross-sectional heterogeneity in time to build is documented across projects.\n- Acceleration is concentrated among projects closer to completion (projects proxied to be more mature are sped up the most).\n- Endogenous time to build generates endogenous amplification and state-dependence of investment on the distribution of projects along completion stages."
    },
    {
      "heading": "Model and Quantification",
      "content": "- Proposal: a novel model of endogenous time to build where a credit crunch increases firm appetite for immediate relative to delayed cash flows, inducing acceleration of near-complete projects and postponement of unbegun projects.\n- Quantification: the model is calibrated/estimated to match the causal estimates from the quasi-experiment and the joint distribution of project costs and gestation lags."
    },
    {
      "heading": "Policy Implications",
      "content": "- Monetary policy: contractionary monetary policy faces headwinds when the distribution of projects skews towards mature projects (i.e., many projects near completion).\n- Fiscal/tax policy: tax policy (e.g., tax credits) can flexibly reshuffle investment expenditures over time by affecting project timing decisions.\n\n---\n\n Content in this bundle\n\n- Working Paper\n  - Working Paper (Markdown version){rel=\"alternate\" type=\"text/markdown\"}\n  - Working Paper (PDF){rel=\"external\" type=\"application/pdf\"}\n\n---\n\nSource: https://www.imf.org/en/publications/wp/issues/2025/04/11/k-wasnt-built-in-a-day-566136"
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    "Authors: Adriano Fernandes, Rodolfo Rigato",
    "Published: April 11, 2025",
    "Series: IMF Working Papers",
    "DOI: https://doi.org/10.5089/9798229008747.001",
    "Physical capital takes time to build; measurement of time to build and its response to firm behavior are scant.",
    "This study uses project-level data from India to document cross-sectional heterogeneity in time to build and to identify causal effects of credit supply shocks on project timing.",
    "Key behavioral response: when credit dries up, firms accelerate ongoing projects and start fewer new projects.",
    "A novel model of endogenous time to build rationalizes these facts and quantifies the implications for investment dynamics and policy.",
    "Data: project-level data from India (project costs and gestation lags).",
    "Identification: exploit quasi-experimental variation in credit supply to establish causal effects of credit shocks on project timing.",
    "Empirical regularity: projects proxied to be more mature are sped up the most when credit tightens.",
    "Firms accelerate ongoing projects and postpone unbegun projects in response to a credit crunch.",
    "Cross-sectional heterogeneity in time to build is documented across projects.",
    "Acceleration is concentrated among projects closer to completion (projects proxied to be more mature are sped up the most).",
    "Endogenous time to build generates endogenous amplification and state-dependence of investment on the distribution of projects along completion stages.",
    "Proposal: a novel model of endogenous time to build where a credit crunch increases firm appetite for immediate relative to delayed cash flows, inducing acceleration of near-complete projects and postponement of unbegun projects.",
    "Quantification: the model is calibrated/estimated to match the causal estimates from the quasi-experiment and the joint distribution of project costs and gestation lags.",
    "Monetary policy: contractionary monetary policy faces headwinds when the distribution of projects skews towards mature projects (i.e., many projects near completion).",
    "Fiscal/tax policy: tax policy (e.g., tax credits) can flexibly reshuffle investment expenditures over time by affecting project timing decisions.",
    "**Working Paper**"
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