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Financing Constraints and Investment Decline in Mexico

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  • Iscan, Talan B

Abstract

To what extent can financing constraints, which have been so central to foreign-debt-related explanations of investment decline in heavily indebted economies, account for low investment rates in Mexico after 1982? In order to investigate the implications of the financing constraints hypothesis on investment decisions, this study employs a cost-of-adjustment model of investment and annual panel data of Mexican manufacturing industries covering the period 1970-90. It is found that some of the debt crisis effects on investment, identified in the earlier literature, may be due to binding financing constraints in Mexico. Copyright 2000 by Blackwell Publishers Ltd and The Victoria University of Manchester

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Article provided by University of Manchester in its journal Manchester School.

Volume (Year): 68 (2000)
Issue (Month): 1 (January)
Pages: 24-43

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Handle: RePEc:bla:manchs:v:68:y:2000:i:1:p:24-43

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  1. Rodrik, Dani, 1991. "Policy uncertainty and private investment in developing countries," Journal of Development Economics, Elsevier, vol. 36(2), pages 229-242, October.
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  5. Demirguc-Kunt, Asli & Detragiache, Enrica, 1992. "Interest rates, official lending, and the debt crisis : a reassessment," Policy Research Working Paper Series 932, The World Bank.
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  8. Hansen, Lars Peter, 1982. "Large Sample Properties of Generalized Method of Moments Estimators," Econometrica, Econometric Society, vol. 50(4), pages 1029-54, July.
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  13. Borensztein, Eduardo, 1990. "Debt overhang, credit rationing and investment," Journal of Development Economics, Elsevier, vol. 32(2), pages 315-335, April.
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Cited by:
  1. Comin, Diego & Loayza, Norman & Pasha, Farooq & Servén, Luis, 2011. "Medium Term Business Cycles in Developing Countries," CEPR Discussion Papers 8574, C.E.P.R. Discussion Papers.

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