Ceilings on Interest Rates and Investment: The Example of Greece

Hercules Voridis

The Review of Economics and Statistics, 1993, vol. 75, issue 2, 276-83

Abstract: This paper examines the influence of credit conditions on private investment under financial repression in Greece. Three flexible accelerator investment specifications are estimated. Alternative measures are tried for the dependent and independent variables. The reported equations are selected by a simple sequential specialization procedure. The empirical results confirm the existence of an important, but lagged, effect of bank finance on investment. This reflects credit rationing, due to interest rate controls, in the Greek banking system. Various arguments from the financial repression literature are invoked to justify the finding of a positive sign on the user cost variables in the investment equations. Copyright 1993 by MIT Press.

Date: 1993
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