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Investment and Credit Constraints in Transition Economies: Micro Evidence from Poland, the Czech Republic, Bulgaria and Romania

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  • Jozef Konings
  • Marian Rizov
  • Hylke Vandenbussche

Abstract

In this paper we investigate to what extent firm investment in transition countries is sensitive to internal finance. We use accounts data of over 4000 companies in four countries at different stages of transition. We find that firms in Bulgaria and Romania are less sensitive to internal financing constraints, in contrast to firms in Poland and the Czech Republic. A likely explanation is that Bulgaria and Romania, which are the least advanced in the reforms towards market economy, have a stronger persistence of soft budget constraints than in the other two more advanced countries.

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Bibliographic Info

Paper provided by LICOS - Centre for Institutions and Economic Performance, KU Leuven in its series LICOS Discussion Papers with number 11202.

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Length: 13 pages
Date of creation: 2002
Date of revision:
Handle: RePEc:lic:licosd:11202

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Keywords: Investment; financial constraints; soft budget constraint; transition to a market economy;

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  1. Andrew B. Abel & Olivier J. Blanchard, 1983. "The Present Value of Profits and Cyclical Movements in Investment," NBER Working Papers 1122, National Bureau of Economic Research, Inc.
  2. Arellano, Manuel & Bond, Stephen, 1991. "Some Tests of Specification for Panel Data: Monte Carlo Evidence and an Application to Employment Equations," Review of Economic Studies, Wiley Blackwell, vol. 58(2), pages 277-97, April.
  3. Steven M. Fazzari & R. Glenn Hubbard & BRUCE C. PETERSEN, 1988. "Financing Constraints and Corporate Investment," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 19(1), pages 141-206.
  4. Aghion, Philippe & Blanchard, Olivier & Burgess, Robin, 1994. "The behaviour of state firms in eastern Europe, pre-privatisation," European Economic Review, Elsevier, vol. 38(6), pages 1327-1349, June.
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Cited by:
  1. Beata S. Javorcik & Mariana Spatareanu, 2008. "Liquidity Constraints and Linkages with Multinationals," LICOS Discussion Papers 22508, LICOS - Centre for Institutions and Economic Performance, KU Leuven.
  2. MAYNERIS, Florian, 2011. "A new perspective on the firm size-growth relationship: shape of profits, investment and heterogeneous credit constraints," CORE Discussion Papers 2011062, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  3. Ciaian, Pavel & Falkowski, Jan & Kancs, d'Artis & Pokrivcak, Jan, 2011. "Productivity and Credit Constraints Firm-Level Evidence from Propensity Score Matching," Working Papers 117484, Factor Markets, Centre for European Policy Studies.
  4. Pavel Ciaian & Jan Fałkowski & D’Artis Kancs, 2012. "Productivity and credit constraints: A firm-level propensity score evidence for agricultural farms in central and east European countries," Acta Oeconomica, Akadémiai Kiadó, Hungary, vol. 62(4), pages 459-487, December.

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