Financial development and dynamic investment behavior: Evidence from panel VAR

被引:992
作者
Love, Inessa [1 ]
Zicchino, Lea [2 ]
机构
[1] World Bank, Res Dept, Finance Grp, Washington, DC 20433 USA
[2] Bank England, Monetary Instruments & Markets Div, HO-2,Threadneedle St, London EC2R 8AH, England
关键词
Financial development; Vector autoregression; Dynamic investment behavior;
D O I
10.1016/j.qref.2005.11.007
中图分类号
F [经济];
学科分类号
02 ;
摘要
We apply vector autoregression (VAR) to firm-level panel data from 36 countries to study the dynamic relationship between firms' financial conditions and investment. By using orthogonalized impulse-response functions we are able to separate the 'fundamental factors' (such as marginal profitability of investment) from the 'financial factors' (such as availability of internal finance) that influence the level of investment. We find that the impact of financial factors on investment, which indicates the severity of financing constraints, is significantly larger in countries with less developed financial systems. Our finding emphasizes the role of financial development in improving capital allocation and growth. (C) 2006 Board of Trustees of the University of Illinois. All rights reserved.
引用
收藏
页码:190 / 210
页数:21
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