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Asset prices, Credit and Investment in Emerging Markets

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Author Info
Tuomas A. Peltonen () (European Central Bank)
Ricardo M. Sousa () (Universidade do Minho - NIPE)
Isabel S. Vansteenkiste () (European Central Bank)

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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.

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Paper provided by NIPE - Universidade do Minho in its series NIPE Working Papers with number 18/2009.

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Date of creation: 2009
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Handle: RePEc:nip:nipewp:18/2009

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Postal: Núcleo de Investigação em Políticas Económicas, Escola de Economia e Gestão, Universidade do Minho, P-4710-057 Braga, Portugal
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Related research
Keywords: investment; credit; asset prices; emerging markets.;

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Find related papers by JEL classification:
E22 - Macroeconomics and Monetary Economics - - Macroeconomics: Consumption, Saving, Production, Employment, and Investment - - - Capital; Investment; Capacity
E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
D24 - Microeconomics - - Production and Organizations - - - Production; Capital and Total Factor Productivity; Capacity

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