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Financial restraints and private investment: evidence from a nonstationary panel

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journal contribution
posted on 25.07.2014, 10:28 by Mauro Costantini, Panicos Demetriades, Gregory James, Kevin C. Lee
We employ recently developed panel data methods to estimate a model of private investment under financial restraints for 20 developing countries using annual data for 1972-2000. We show that the qualitative nature of the results varies depending on whether we take into account cross-country effects. When we allow for cross-sectional dependence, investment displays more sensitivity to world capital market conditions and exchange rate uncertainty. A perhaps even more surprising result is the finding that countries that managed to suppress domestic real interest rates without generating high inflation enjoyed higher levels of private investment than those that would have been obtained under liberalized conditions.

Funding

This work was supported by the ESRC [grant numbers RES-156-25-0009 and PTA-026-27-1437].

History

School

  • Business and Economics

Department

  • Economics

Published in

Economic Inquiry

Volume

51

Issue

1

Pages

248 - 259

Citation

CONSTANTINI, M. ... et al., 2013. Financial restraints and private investment: evidence from a nonstationary panel. Economic Inquiry, 51 (1), pp. 248-259.

Publisher

John Wiley & Sons (© Western Economic Association International)

Version

AM (Accepted Manuscript)

Publication date

2013

Notes

This is the peer reviewed version of the following article: CONSTANTINI, M. ... et al., 2013. Financial restraints and private investment: evidence from a nonstationary panel. Economic Inquiry, 51 (1), pp. 248-259, which has been published in final form at: http://dx.doi.org/10.1111/j.1465-7295.2011.00424.x. This article may be used for non-commercial purposes in accordance with Wiley Terms and Conditions for self-archiving.

ISSN

0095-2583

eISSN

1465-7295

Language

en

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Keywords

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