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Financing Constraints and Investment Decline in Mexico

  • Talan B. Iscan

    ()

    (Department of Economics, Dalhousie University)

To what extent can financing constraints, which have been so central to foreign debt related explanations of investment decline in heavily indebted economies, account for low investment rates in Mexico after 1982? In order to investigate the implications of financing constraints hypothesis on investment decisions, this study employs a cost-of-adjustment model of investment and annual panel data of Mexican manufacturing industries covering the period 1970 to 1990. It is found that part of the debt crisis effects on investment, identified in the earlier literature, may be due to binding financing constraints in Mexico.

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File URL: http://www.economics.dal.ca/RePEc/dal/wparch/fdis98.pdf
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File URL: http://www.economics.dal.ca/RePEc/dal/wparch/fdis98.ps
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Paper provided by Dalhousie, Department of Economics in its series Department of Economics at Dalhousie University working papers archive with number fdis98.

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Length: 26 pages
Date of creation: 10 Mar 1998
Date of revision:
Handle: RePEc:dal:wparch:fdis98
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  1. Rodrik, Dani, 1991. "Policy uncertainty and private investment in developing countries," Journal of Development Economics, Elsevier, vol. 36(2), pages 229-242, October.
  2. Hayashi, Fumio & Inoue, Tohru, 1991. "The Relation between Firm Growth and Q with Multiple Capital Goods: Theory and Evidence from Panel Data on Japanese Firms," Econometrica, Econometric Society, vol. 59(3), pages 731-53, May.
  3. Olivier Jean Blanchard & Stanley Fischer, 1989. "Lectures on Macroeconomics," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262022834, June.
  4. Hansen, Lars Peter, 1982. "Large Sample Properties of Generalized Method of Moments Estimators," Econometrica, Econometric Society, vol. 50(4), pages 1029-54, July.
  5. Abel, Andrew B & Blanchard, Olivier J, 1986. "The Present Value of Profits and Cyclical Movements in Investment," Econometrica, Econometric Society, vol. 54(2), pages 249-73, March.
  6. Warner, Andrew M., 1994. "Mexico's investment collapse: debt or oil?," Journal of International Money and Finance, Elsevier, vol. 13(2), pages 239-256, April.
  7. Stephen Oliner & Glenn Rudebusch & Daniel Sichel, 1993. "New and old models of business investment: a comparison of forecasting performance," Working Paper Series / Economic Activity Section 141, Board of Governors of the Federal Reserve System (U.S.).
  8. Hubbard, R Glenn & Kashyap, Anil K, 1992. "Internal Net Worth and the Investment Process: An Application to U.S. Agriculture," Journal of Political Economy, University of Chicago Press, vol. 100(3), pages 506-34, June.
  9. Warner, Andrew M, 1992. "Did the Debt Crisis Cause the Investment Crisis?," The Quarterly Journal of Economics, MIT Press, vol. 107(4), pages 1161-86, November.
  10. Demirguc-Kunt, Asli & Detragiache, Enrica, 1994. "Interest rates, official lending, and the debt crisis: A reassessment," Journal of Development Economics, Elsevier, vol. 44(2), pages 263-285, August.
  11. Steven Fazzari & R. Glenn Hubbard & Bruce C. Petersen, 1987. "Financing Constraints and Corporate Investment," NBER Working Papers 2387, National Bureau of Economic Research, Inc.
  12. Otto Eckstein & Allen Sinai, 1986. "The Mechanisms of the Business Cycle in the Postwar Era," NBER Chapters, in: The American Business Cycle: Continuity and Change, pages 39-122 National Bureau of Economic Research, Inc.
  13. Stiglitz, Joseph E & Weiss, Andrew, 1981. "Credit Rationing in Markets with Imperfect Information," American Economic Review, American Economic Association, vol. 71(3), pages 393-410, June.
  14. Caballero, Ricardo J, 1991. "On the Sign of the Investment-Uncertainty Relationship," American Economic Review, American Economic Association, vol. 81(1), pages 279-88, March.
  15. Bond, Stephen & Meghir, Costas, 1994. "Dynamic Investment Models and the Firm's Financial Policy," Review of Economic Studies, Wiley Blackwell, vol. 61(2), pages 197-222, April.
  16. Pindyck, Robert S, 1993. "A Note on Competitive Investment under Uncertainty," American Economic Review, American Economic Association, vol. 83(1), pages 273-77, March.
  17. Borensztein, Eduardo, 1990. "Debt overhang, credit rationing and investment," Journal of Development Economics, Elsevier, vol. 32(2), pages 315-335, April.
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