Asset prices, Credit and Investment in Emerging Markets

Tuomas A. Peltonen (), Ricardo Sousa and Isabel Vansteenkiste ()
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Tuomas A. Peltonen: European Central Bank

No 18/2009, NIPE Working Papers from NIPE - Universidade do Minho

Abstract: We build a panel of 31 emerging economies to uncover the determinants of private investment growth in emerging markets. Using several econometric techniques and quarterly data for the period 1990:1-2008:3, we show that: (i) the GDP and the cost of capital are among the fundamental determinants of private investment; (ii) the equity price impacts positively and significantly on investment; (iii) financial factors (such as, credit and lending rate) play an important role on the dynamics of investment, in particular, for Asian and Latin American countries; (iv) investment growth exhibits substantial persistence and responds sluggishly to shocks; and (v) crises episodes magnify the negative response of investment.

Keywords: investment; credit; asset prices; emerging markets. (search for similar items in EconPapers)
JEL-codes: D24 E22 E44 (search for similar items in EconPapers)
Date: 2009
New Economics Papers: this item is included in nep-cba, nep-mac and nep-sea
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Citations: View citations in EconPapers (5)

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