Economics at your fingertips  

Financial Restraints and Private Investment: Evidence from a Nonstationary Panel*

Panicos Demetriades (), Mauro Costantini (), Gregory James () and Kevin Lee ()

No 10/06, Discussion Papers in Economics from Division of Economics, School of Business, University of Leicester

Abstract: 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.

Keywords: Financial Restraints; Private Investment; Nonstationary Panels; Cross- Sectional Dependence (search for similar items in EconPapers)
JEL-codes: O16 G18 G28 (search for similar items in EconPapers)
Date: 2010-01
References: View complete reference list from CitEc
Citations: Track citations by RSS feed

Downloads: (external link) (application/pdf)

Related works:
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:

Ordering information: This working paper can be ordered from ... -1/discussion-papers

Access Statistics for this paper

More papers in Discussion Papers in Economics from Division of Economics, School of Business, University of Leicester School of Business, University of Leicester, University Road. Leicester. LE1 7RH. UK Provider-Homepage: Contact information at EDIRC.
Bibliographic data for series maintained by Abbie Sleath ().

Page updated 2021-06-04
Handle: RePEc:lec:leecon:10/06