Shocks to the cost of borrowing and capital structure
We use the imposition of a non remunerated reserve on short term borrowing in Chile in 1991 as a cuasi natural experiment to test the eﬀects of an increase in the cost of short term borrowing on capital structure and investment. The diﬀerential impact of this regulatory measure across ﬁrms allows us to perform a diﬀerence in diﬀerences analysis. We ﬁnd a drastic drop in short term borrowing of regulated ﬁrms that was almost completely oﬀset by additional long term borrowing. The nature of the experiment allows us to isolate a clear causality from changes in the cost of funds to capital structure, solving some of the endogeneity problems present in preexisting literature.
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- De Gregorio, Jose & Edwards, Sebastian & Valdes, Rodrigo O., 2000.
"Controls on capital inflows: do they work?,"
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- Francisco Gallego & Leonardo Hernández & Klaus Schmidt-Hebbel, 2002. "Capital Controls in Chile: Were They Effective?," Central Banking, Analysis, and Economic Policies Book Series, in: Leonardo Hernández & Klaus Schmidt-Hebbel & Norman Loayza (Series Editor) & Klaus Schmidt-Hebbel (Se (ed.), Banking, Financial Integration, and International Crises, edition 1, volume 3, chapter 12, pages 361-412 Central Bank of Chile.
- Manuel Agosin & Ricardo French-Davis, 1997. "Managing capital inflows in Chile," Estudios de Economia, University of Chile, Department of Economics, vol. 24(2 Year 19), pages 297-326, December.
- Jorge Desormeaux, 2002. "Capital Markets in Chile: From Financial Repression to Financial Deepening," Economic Policy Papers Central Bank of Chile 04, Central Bank of Chile.
- Sebastian Edwards, 1999.
"How Effective Are Capital Controls?,"
Journal of Economic Perspectives,
American Economic Association, vol. 13(4), pages 65-84, Fall.
- Steven N. Kaplan & Luigi Zingales, 1997. "Do Investment-Cash Flow Sensitivities Provide Useful Measures of Financing Constraints?," The Quarterly Journal of Economics, Oxford University Press, vol. 112(1), pages 169-215.
- Rodrigo Cifuentes & Jorge Desormeaux & Claudio González, 2002. "Capital markets in Chile: from financial repression to financial deepening," BIS Papers chapters, in: Bank for International Settlements (ed.), The development of bond markets in emerging economies, volume 11, pages 86-102 Bank for International Settlements.
- Sebastian Edwards, 1998. "Capital Inflows into Latin America: A Stop-Go Story?," NBER Working Papers 6441, National Bureau of Economic Research, Inc.
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