Explicit Lagrange multiplier for firms facing a debt ceiling constraint

This paper provides the explicit expression of investment facing a binding debt ceiling and the explicit expression of the Lagrange multipliers relate d to the binding debt ceiling constraint. This result allows us to check fo r misspecification of the parameterizations of these Lagrange multipliers u sed in Euler investment equations tests during the 1990's. (C) 2000 Elsevie r Science S.A. All rights reserved. JEL classification: D92; G32.