Investment and financial restraints: theory and evidence
This paper examines investment decisions in an economy with two financial markets: an official market, which is subject to rationing due to an interest rate ceiling, and an unrestricted market, with a higher interest rate. In this context, the long-run equilibrium aggregate capital stock is unambigu...
| Main Authors: | , |
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| Format: | Journal article |
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2000
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| _version_ | 1797060433959452672 |
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| author | Devereux, M Demetriades, P |
| author_facet | Devereux, M Demetriades, P |
| author_sort | Devereux, M |
| collection | OXFORD |
| description | This paper examines investment decisions in an economy with two financial markets: an official market, which is subject to rationing due to an interest rate ceiling, and an unrestricted market, with a higher interest rate. In this context, the long-run equilibrium aggregate capital stock is unambiguously higher than in the absence of the interest rate ceiling, even though its relationship with the ceiling is non-monotonic. Empirical results using aggregate panel data from 52 developing countries for the period 1974–1988 provide support for the model, particularly in economies that have some access to international capital markets. |
| first_indexed | 2024-03-06T20:17:04Z |
| format | Journal article |
| id | oxford-uuid:2c789f2c-e1c2-4ba7-9cc6-ae7ed47edfd1 |
| institution | University of Oxford |
| last_indexed | 2024-03-06T20:17:04Z |
| publishDate | 2000 |
| record_format | dspace |
| spelling | oxford-uuid:2c789f2c-e1c2-4ba7-9cc6-ae7ed47edfd12022-03-26T12:37:30ZInvestment and financial restraints: theory and evidenceJournal articlehttp://purl.org/coar/resource_type/c_dcae04bcuuid:2c789f2c-e1c2-4ba7-9cc6-ae7ed47edfd1Saïd Business School - Eureka2000Devereux, MDemetriades, PThis paper examines investment decisions in an economy with two financial markets: an official market, which is subject to rationing due to an interest rate ceiling, and an unrestricted market, with a higher interest rate. In this context, the long-run equilibrium aggregate capital stock is unambiguously higher than in the absence of the interest rate ceiling, even though its relationship with the ceiling is non-monotonic. Empirical results using aggregate panel data from 52 developing countries for the period 1974–1988 provide support for the model, particularly in economies that have some access to international capital markets. |
| spellingShingle | Devereux, M Demetriades, P Investment and financial restraints: theory and evidence |
| title | Investment and financial restraints: theory and evidence |
| title_full | Investment and financial restraints: theory and evidence |
| title_fullStr | Investment and financial restraints: theory and evidence |
| title_full_unstemmed | Investment and financial restraints: theory and evidence |
| title_short | Investment and financial restraints: theory and evidence |
| title_sort | investment and financial restraints theory and evidence |
| work_keys_str_mv | AT devereuxm investmentandfinancialrestraintstheoryandevidence AT demetriadesp investmentandfinancialrestraintstheoryandevidence |