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Decline in Self-financing Capacity in 2001 Due to the Economic Downturn


  • Michael Peneder


  • Michael Pfaffermayr



In 2001, Austrian manufacturing experienced a marked slowdown in demand. Due to the weak growth performance on a world-wide scale, exports to the main trading partners lost their dynamism. WIFO estimates that production expanded by only 1.8 percent in 2001. In the WIFO industry surveys, firms reported rather pessimistic expectations, and during 2001 these expectations got worse from quarter to quarter. On the cost side, there was a decrease in material prices, but a small increase in labour unit costs. Interest rates, however, remained relatively low. In the face of this unfavourable environment, the cash-flow/sales ratio, a measure of the ability of firms to finance new investments or to pay out dividends, has probably decreased. Based on a dynamic econometric panel model, the prediction of the cash-flow/sales ratio amounts to 9.6 percent for 2001, following 9.8 percent in 2000. A survey of 150 manufacturing firms conducted by the Federation of Austrian Industrialists likewise points to a reduction in the cash-flow/sales ratio in the year 2001. Although international comparative data are available only until 1999, Austrian manufacturing has continuously strengthened its position with regard to both its cash-flow ratio and its equity ratio throughout the past decade. For both ratios it is still below the average of ten comparable EU countries, but generally ahead of Germany and Italy. European front runners in terms of the cash-flow/sales ratio in 1999 are the Netherlands and Finland, followed by Denmark. The ranking is similar in terms of the equity ratio, except that Spain and Portugal appear to be ahead of Denmark.

Suggested Citation

  • Michael Peneder & Michael Pfaffermayr, 2002. "Decline in Self-financing Capacity in 2001 Due to the Economic Downturn," WIFO Monatsberichte (monthly reports), WIFO, vol. 75(3), pages 151-159, March.
  • Handle: RePEc:wfo:monber:y:2002:i:3:p:151-159

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    References listed on IDEAS

    1. Nickell, Stephen J, 1981. "Biases in Dynamic Models with Fixed Effects," Econometrica, Econometric Society, vol. 49(6), pages 1417-1426, November.
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