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Reforms and Investment in India

  • Prema-Chandra Athukorala
  • Kunal Sen

This paper examines the determinants of private corporate investment in India with emphasis on the implications of the policy reforms initiated in 1991. The results suggest that the net impact of the reforms on corporate investment has been salutary. The adverse impact of the decline in public investment has been outweighed by the positive effects of the decline in the cost of capital and favourable changes in investor perception brought about by the reforms. While it is not possible to generalise from a single country case, our results cast doubt on the existing cross-country evidence of a negative impact of structural adjustment reforms on private investment.

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File URL: http://coombs.anu.edu.au/~ecopac/wpaper/wp1996/966.prn
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Paper provided by Australian National University, Department of Economics in its series Trade and Development with number 96/6.

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Date of creation: Aug 1996
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Handle: RePEc:wop:anuetd:9606
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  1. Ibarra, Luis Alberto, 1995. "Credibility of trade policy reform and investment: the Mexican experience," Journal of Development Economics, Elsevier, vol. 47(1), pages 39-60, June.
  2. Steven Fazzari & R. Glenn Hubbard & Bruce C. Petersen, 1987. "Financing Constraints and Corporate Investment," NBER Working Papers 2387, National Bureau of Economic Research, Inc.
  3. Rodrik, Dani, 1991. "Policy uncertainty and private investment in developing countries," Journal of Development Economics, Elsevier, vol. 36(2), pages 229-242, October.
  4. Laumas, Prem S, 1990. "Monetization, Financial Liberalization, and Economic Development," Economic Development and Cultural Change, University of Chicago Press, vol. 38(2), pages 377-90, January.
  5. Robert S. Pindyck, 1990. "Irreversibility, Uncertainty, and Investment," NBER Working Papers 3307, National Bureau of Economic Research, Inc.
  6. Robert S. Pindyck & Andres Solimano, 1993. "Economic Instability and Aggregate Investment," NBER Working Papers 4380, National Bureau of Economic Research, Inc.
  7. Michael Devereux & Fabio Schiantarelli, 1990. "Investment, Financial Factors, and Cash Flow: Evidence from U.K. Panel Data," NBER Chapters, in: Asymmetric Information, Corporate Finance, and Investment, pages 279-306 National Bureau of Economic Research, Inc.
  8. Jones, Charles I., 1994. "Economic growth and the relative price of capital," Journal of Monetary Economics, Elsevier, vol. 34(3), pages 359-382, December.
  9. Kwiatkowski, Denis & Phillips, Peter C. B. & Schmidt, Peter & Shin, Yongcheol, 1992. "Testing the null hypothesis of stationarity against the alternative of a unit root : How sure are we that economic time series have a unit root?," Journal of Econometrics, Elsevier, vol. 54(1-3), pages 159-178.
  10. Hoshi, Takeo & Kashyap, Anil & Scharfstein, David, 1991. "Corporate Structure, Liquidity, and Investment: Evidence from Japanese Industrial Groups," The Quarterly Journal of Economics, MIT Press, vol. 106(1), pages 33-60, February.
  11. Mark L. Gertler, 1988. "Financial Structure and Aggregate Economic Activity: An Overview," NBER Working Papers 2559, National Bureau of Economic Research, Inc.
  12. Joshua Greene & Delano Villanueva, 1991. "Private Investment in Developing Countries: An Empirical Analysis," IMF Staff Papers, Palgrave Macmillan, vol. 38(1), pages 33-58, March.
  13. Bleaney, Michael & Greenaway, David, 1993. "Adjustment to external imbalance and investment slumps in developing countries," European Economic Review, Elsevier, vol. 37(2-3), pages 577-585, April.
  14. Oliner, Stephen & Rudebusch, Glenn & Sichel, Daniel, 1995. "New and Old Models of Business Investment: A Comparison of Forecasting Performance," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 27(3), pages 806-26, August.
  15. Greenaway, David & Morrissey, Oliver, 1993. "Structural Adjustment and Liberalisation in Developing Countries: What Lessons Have We Learned?," Kyklos, Wiley Blackwell, vol. 46(2), pages 241-61.
  16. Srinivasan, T. N., 1994. "Data base for development analysis Data base for development analysis: An overview," Journal of Development Economics, Elsevier, vol. 44(1), pages 3-27, June.
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