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Financial Liberalization, Private Investment and Portfolio Choice: Financialization of Real Sectors in Emerging Markets Author info | Abstract | Publisher info | Download info | Related research | Statistics Demir, Firat
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Using firm level panel data, we analyze the impacts of rates of return gap between financial and fixed investments under uncertainty on real investment performance in three emerging markets, Argentina, Mexico and Turkey. Employing a portfolio choice model to explain the low fixed investment rates in developing countries during the 1990s, we suggest that rather than investing in irreversible long term fixed investments, firms may choose to invest in reversible short term financial investments depending on respective rates of returns and the overall uncertainty in the economy. The empirical results show that increasing rates of return gap and uncertainty have an economically and statistically significant fixed investment reducing effect while the opposite is true with respect to financial investments.
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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number
3835.
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Date of creation: 01 Apr 2008Date of revision:
01 Apr 2008Handle: RePEc:pra:mprapa:3835Contact details of provider: Postal: Schackstr. 4, D-80539 Munich, Germany Phone: +49-(0)89-2180-2219 Fax: +49-(0)89-2180-3900 Web page: http://mpra.ub.uni-muenchen.de More information through EDIRC
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Keywords: Private Investment Portfolio Choice Uncertainty Financialization Find related papers by JEL classification: C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data D21 - Microeconomics - - Production and Organizations - - - Firm Behavior O16 - Economic Development, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions E22 - Macroeconomics and Monetary Economics - - Macroeconomics: Consumption, Saving, Production, Employment, and Investment - - - Capital; Investment; Capacity
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Diego Comin & Thomas Philippon, 2005.
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Frenkel, Roberto & Ros, Jaime, 2006.
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Demir, Firat, 2004.
"A Failure Story: Politics and Financial Liberalization in Turkey, Revisiting the Revolving Door Hypothesis ,"
World Development ,
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Rojas-Suarez, L. & Weisbrod, S.R., 1996.
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