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Investment equations and financial restrictions at firm level: the case of Uruguay

Author

Listed:
  • Julio de Brun

    (Universidad ORT Uruguay. Facultad de Administración y Ciencias Sociales. Departmento de Economía)

  • Nestor Gandelman

    (Universidad ORT Uruguay. Facultad de Administración y Ciencias Sociales. Departmento de Economía)

  • Eduardo Barbieri

    (Universidad ORT Uruguay. Facultad de Administración y Ciencias Sociales. Departmento de Economía)

Abstract

Three alternative specifications of an investment euqtion have been tested using panel data of Uruguayan firms: a traditional accelerator model of investment, an error-correction version of that accelerator model, which tries to capture the adjustment processo to the long-run relationship between capital and sales, and an Euler equation approach. These models of investment were used to test for the existence of financial constraints in the investment decision process. Our estimates confirm the existence of financial restrictions on investment decisions od Uruguayan firms in the period under consideration (all estimates correspond to 1997-2000). We explored the effect on firms' ability to finance investment of two firms' attribute: size and origin of capitals. Regarding to size, our results coincide with the intuition, the theory and the usual result in literatura that small firms face greater constraints to finance their desired levels of investment. We also explored whether foreign owned firms suffered less from financial restrictions than national firms. This could not be asserted. Lastly, our estimates suggest a general increase in the severity of financial restrictions following the 1999-2000 crisis. In particular smaller firms were affected the most.

Suggested Citation

  • Julio de Brun & Nestor Gandelman & Eduardo Barbieri, 2001. "Investment equations and financial restrictions at firm level: the case of Uruguay," Documentos de Investigación 11, Universidad ORT Uruguay. Facultad de Administración y Ciencias Sociales.
    • Handle: RePEc:avs:wpaper:11
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    References listed on IDEAS

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    Cited by:

    1. Arturo Galindo & Fabio Schiantarelli, 2002. "Credit Constraints in Latin America: An Overview of the Micro Evidence," Research Department Publications 3165, Inter-American Development Bank, Research Department.
    2. Arturo Galindo & Fabio Schiantarelli, 2002. "Limitaciones crediticias en América Latina: panorámica general de los elementos de juicio al nivel micro," Research Department Publications 4306, Inter-American Development Bank, Research Department.
    3. Serafín Frache & Gabriel Katz, 2004. "Estimating a Risky Term Structure of Uruguayan Sovereign Bonds," Documentos de Trabajo (working papers) 0304, Department of Economics - dECON.
    4. Nestor Gandelman & Alejandro Rasteletti, 2012. "The Impact of Bank Credit on Employment Formality in Uruguay," Research Department Publications 4778, Inter-American Development Bank, Research Department.
    5. By Spiros Bougheas & Paul Mizen & Simone Silva, 2015. "The open economy balance sheet channel and the exporting decisions of firms: evidence from the Brazilian crisis of 1999," Oxford Economic Papers, Oxford University Press, vol. 67(4), pages 1096-1122.
    6. Guariglia, Alessandra & Mateut, Simona, 2010. "Inventory investment, global engagement, and financial constraints in the UK: Evidence from micro data," Journal of Macroeconomics, Elsevier, vol. 32(1), pages 239-250, March.
    7. Agustinus, Prasetyantoko, 2007. "Debt Composition and Balance Sheet Effect of Currency Crisis in Indonesia," MPRA Paper 6501, University Library of Munich, Germany.

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