Private Investment, Portfolio Choice and Financialization of Real Sectors in Emerging Markets
AbstractUsing micro level panel data, we analyze the impacts of rates of return gap between fixed and financial 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 on risky and irreversible long term fixed investment projects, firms may choose to invest on reversible short term financial investments depending on respective rates of returns and 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 effects in all three countries while the opposite is true with respect to financial investments.
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Bibliographic InfoPaper provided by University Library of Munich, Germany in its series MPRA Paper with number 3835.
Date of creation: 2007
Date of revision: Jul 2007
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; Longitudinal Data; Spatial Time Series
- D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
- O16 - Economic Development, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance
- 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
This paper has been announced in the following NEP Reports:
- NEP-ALL-2007-07-13 (All new papers)
- NEP-CWA-2007-07-13 (Central & Western Asia)
- NEP-MAC-2007-07-13 (Macroeconomics)
- NEP-PPM-2007-07-13 (Project, Program & Portfolio Management)
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