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The end of financial repression? A cross-country analysis of investment

By Panicos O. Demetriades, Gregory A. James and Kevin Lee


We estimate a model of investment under nancial restrains due to Demetriades\ud and Devereux (2000), using total and private aggregate investment data from 38 high\ud income and low income countries during 1972-2002. Our main ndings for the overall\ud sample are that (i) the US real interest rate is a robust determinant of total investment,\ud suggesting that US monetary policy may have unintended global consequences; (ii) a\ud term proxying domestic nancial restraints is found to have an insigni cant impact\ud both on total and private investment. These ndings are, however, somewhat less con-\ud clusive when we examine low income countries on their own, where fnancial restraints\ud are found to have a negative and marginally signi cant e¤ect on total investment

Topics: nancial restraints, investment, dynamic panel data
Publisher: Dept. of Economics, University of Leicester
Year: 2008
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