The dynamics of investment projects: evidence from Peru

Rocio Gondo Mori and Marco Vega

No 621, BIS Working Papers from Bank for International Settlements

Abstract: We analyse the effect of commodity price cycles on firm investment decisions at the project level, by considering the decision to delay, cancel or complete a project as initially announced. In particular, we use logit and duration models of competing risks on a novel dataset of announced investment projects in Peru from different economic sectors. The empirical framework for the timing of investment is motivated by real option models for projects that take time to build, with commodity prices used as a proxy of expected future income and their volatility as a proxy for uncertainty. Our results suggest that both a reduction in commodity prices and an increase in volatility increase the probability to delay investment in the mining sector, with an amplification effect when both simultaneously occur. In other sectors, delays in implementation occur more often in periods of high volatility. Probability regressions under a competing risk framework suggest that higher commodity prices lead to a higher probability of completion in all sectors of the economy.

Keywords: investment projects; panel logit; competing risks (search for similar items in EconPapers)
Pages: 43 pages
Date: 2017-03
New Economics Papers: this item is included in nep-ppm
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

Downloads: (external link)
http://www.bis.org/publ/work621.pdf Full PDF document (application/pdf)
http://www.bis.org/publ/work621.htm (text/html)

Related works:
Journal Article: The dynamics of investment projects: Evidence from Peru (2019)
Working Paper: The Dynamics of Investment Projects: Evidence from Peru (2017)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:bis:biswps:621

Access Statistics for this paper

More papers in BIS Working Papers from Bank for International Settlements Contact information at EDIRC.
Bibliographic data for series maintained by Martin Fessler (webmaster@bis.org).