IDEAS home Printed from https://ideas.repec.org/p/gat/wpaper/1532.html
   My bibliography  Save this paper

Unbalanced credit distribution in emerging economies and FDI

Author

Listed:
  • Damien Cubizol

    (Université de Lyon, F-69007, France; CNRS, GATE Lyon St Etienne, 93, Chemin des Mouilles, F-69130, Ecully, France; Université Lyon 2, Lyon, F-69007, France)

Abstract

This empirical study shows that an increasing credit distribution to State-Owned Enterprises (SOEs), to the detriment of private firms, slows the increase in inward FDI in emerging economies. The first approach is global and dynamic; it relies on GMM and Bayesian techniques, utilizing a sample of 40 emerging countries over the period 1988-2008. Then, a sectoral approach is implemented for 1992-2012 and strengthens the negative effect on inward FDI (but the difference of financial dependence between sectors does not have clear effects). Finally, certain policy actions can improve the allocation of domestic and foreign capital in emerging economies.

Suggested Citation

  • Damien Cubizol, 2015. "Unbalanced credit distribution in emerging economies and FDI," Working Papers 1532, Groupe d'Analyse et de Théorie Economique Lyon St-Étienne (GATE Lyon St-Étienne), Université de Lyon.
    • Handle: RePEc:gat:wpaper:1532
    as

    Download full text from publisher

    File URL: ftp://ftp.gate.cnrs.fr/RePEc/2015/1532.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Chinn, Menzie David & Ito, Hiro, 2005. "What Matters for Financial Development? Capital Controls, Institutions, and Interactions," Santa Cruz Department of Economics, Working Paper Series qt5pv1j341, Department of Economics, UC Santa Cruz.
    2. Chinn, Menzie D. & Prasad, Eswar S., 2003. "Medium-term determinants of current accounts in industrial and developing countries: an empirical exploration," Journal of International Economics, Elsevier, vol. 59(1), pages 47-76, January.
    3. Begg, David & Portes, Richard, 1993. "Enterprise debt and financial restructuring in Central and Eastern Europe," European Economic Review, Elsevier, vol. 37(2-3), pages 396-407, April.
    4. Guillermo A. Calvo & Jacob A. Frenkel, 1991. "Credit Markets, Credibility, and Economic Transformation," Journal of Economic Perspectives, American Economic Association, vol. 5(4), pages 139-148, Fall.
    5. Jan Hanousek & Evzen Kocenda & Jan Svejnar, 2004. "Spinoffs, Privatization and Corporate Performance in Emerging Markets," Microeconomics 0406003, University Library of Munich, Germany.
    6. Chinn, Menzie D. & Ito, Hiro, 2006. "What matters for financial development? Capital controls, institutions, and interactions," Journal of Development Economics, Elsevier, vol. 81(1), pages 163-192, October.
    7. Corbett, Jenny & Mayer, Colin, 1991. "Financial Reform in Eastern Europe: Progress with the Wrong Model," Oxford Review of Economic Policy, Oxford University Press and Oxford Review of Economic Policy Limited, vol. 7(4), pages 57-75, Winter.
    8. Crivelli, Ernesto, 2013. "Fiscal impact of privatization revisited: The role of tax revenues in transition economies," Economic Systems, Elsevier, vol. 37(2), pages 217-232.
    9. Tamim Bayoumi & Hui Tong & Shang-Jin Wei, 2012. "The Chinese Corporate Savings Puzzle: A Firm-level Cross-Country Perspective," NBER Chapters, in: Capitalizing China, pages 283-308, National Bureau of Economic Research, Inc.
    10. Ann E. Harrison & Margaret S. McMillan, 2022. "Does direct foreign investment affect domestic credit constraints?," World Scientific Book Chapters, in: Globalization, Firms, and Workers, chapter 7, pages 153-180, World Scientific Publishing Co. Pte. Ltd..
    11. David Begg & Richard Portes, 1993. "Enterprise debt and economic transformation (Financial restructuring of the state sector in Central and Eastern Europe)," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 1(1), pages 116-117, January.
    12. Jan Hanousek & Evžen Kočenda & Jan Svejnar, 2009. "Divestitures, privatization and corporate performance in emerging markets," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 17(1), pages 43-73, January.
    13. Saul Estrin & Jan Hanousek & Evzen Kocenda & Jan Svejnar, 2009. "The Effects of Privatization and Ownership in Transition Economies," Journal of Economic Literature, American Economic Association, vol. 47(3), pages 699-728, September.
    14. Kazuhiko Hayakawa, 2009. "First Difference or Forward Orthogonal Deviation- Which Transformation Should be Used in Dynamic Panel Data Models?: A Simulation Study," Economics Bulletin, AccessEcon, vol. 29(3), pages 2008-2017.
    15. Héricourt, Jérôme & Poncet, Sandra, 2009. "FDI and credit constraints: Firm-level evidence from China," Economic Systems, Elsevier, vol. 33(1), pages 1-21, March.
    16. Mr. Jeffrey M. Davis & Mr. Thomas J Richardson & Mr. Rolando Ossowski & Mr. Steven A Barnett, 2000. "Fiscal and Macroeconomic Impact of Privatization," IMF Occasional Papers 2000/010, International Monetary Fund.
    17. Harper, Joel T, 2001. "Short-Term Effects of Privatization on Operating Performance in the Czech Republic," Journal of Financial Research, Southern Finance Association;Southwestern Finance Association, vol. 24(1), pages 119-131, Spring.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Damien Cubizol, 2015. "Unbalanced credit distribution in emerging economies and FDI," Working Papers halshs-01241147, HAL.
    2. Kampouris, Ilias & Mertzanis, Charilaos & Samitas, Aristeidis, 2022. "Foreign ownership and the financing constraints of firms operating in a multinational environment," International Review of Financial Analysis, Elsevier, vol. 83(C).
    3. Dramane Coulibaly & Blaise Gnimassoun & Valérie Mignon, 2018. "The tale of two international phenomena: International migration and global imbalances," Working Papers 2018-02, CEPII research center.
    4. Stepan Jurajda & Juraj Stancik, 2012. "Foreign Ownership and Corporate Performance: The Czech Republic at EU Entry," Czech Journal of Economics and Finance (Finance a uver), Charles University Prague, Faculty of Social Sciences, vol. 62(4), pages 306-324, August.
    5. Hanousek, Jan & Kočenda, Evžen & Mašika, Michal, 2012. "Firm efficiency: Domestic owners, coalitions, and FDI," Economic Systems, Elsevier, vol. 36(4), pages 471-486.
    6. Menzie D. Chinn, 2012. "Imbalances, Overheating and the Prospects for Global Recovery," Chapters, in: Maurice Obstfeld & Dongchul Cho & Andrew Mason (ed.), Global Economic Crisis, chapter 6, Edward Elgar Publishing.
    7. Mr. Cian Allen & Camila Casas & Mr. Giovanni Ganelli & Luciana Juvenal & Mr. Daniel Leigh & Mr. Pau Rabanal & Cyril Rebillard & Jair Rodriguez & João Tovar Jalles, 2023. "2022 Update of the External Balance Assessment Methodology," IMF Working Papers 2023/047, International Monetary Fund.
    8. Cubizol, Damien, 2018. "Transition and capital misallocation: the Chinese case," Journal of International Money and Finance, Elsevier, vol. 81(C), pages 88-115.
    9. Florian Morvillier, 2018. "On the impact of the launch of the euro on EMU macroeconomic vulnerability," EconomiX Working Papers 2018-51, University of Paris Nanterre, EconomiX.
    10. Conor O'Toole & Carol Newman, 2012. "Investment Financing and Financial Development: Firm Level Evidence from Vietnam," The Institute for International Integration Studies Discussion Paper Series iiisdp409, IIIS.
    11. Joseph E. Gagnon & C. Fred Bergsten, 2012. "Currency Manipulation, the US Economy, and the Global Economic Order," Policy Briefs PB12-25, Peterson Institute for International Economics.
    12. Evžen Kočenda & Jan Hanousek, 2012. "State ownership and control in the Czech Republic," Economic Change and Restructuring, Springer, vol. 45(3), pages 157-191, August.
    13. Bayoumi, Tamim & Gagnon, Joseph & Saborowski, Christian, 2015. "Official financial flows, capital mobility, and global imbalances," Journal of International Money and Finance, Elsevier, vol. 52(C), pages 146-174.
    14. Constantin Bürgi & Vida Bobic & Min Wu, 2019. "Net Capital Flows and Portfolio Diversification," CESifo Working Paper Series 7883, CESifo.
    15. Hong, Seiwoong & Lee, Junyong & Oh, Frederick Dongchuhl & Shin, Donglim, 2023. "Religion and foreign direct investment," International Business Review, Elsevier, vol. 32(1).
    16. Altunbaş, Yener & Thornton, John & Vasilakis, Chrysovalantis, 2023. "More Foreign Aid, Less Financial Development," Economia Internazionale / International Economics, Camera di Commercio Industria Artigianato Agricoltura di Genova, vol. 76(4), pages 495-528.
    17. Blaise Gnimassoun, 2017. "Exchange rate misalignments and the external balance under a pegged currency system," Review of International Economics, Wiley Blackwell, vol. 25(5), pages 949-974, November.
    18. Joshua Aizenman & Yothin Jinjarak, 2009. "The Usa As The ‘Demander Of Last Resort’ And The Implications For China'S Current Account," Pacific Economic Review, Wiley Blackwell, vol. 14(3), pages 426-442, August.
    19. Océane Blomme & Jérôme Héricourt, 2023. "Inequality, Current Account Imbalances and Middle Incomes," Working Papers 2023-11, CEPII research center.
    20. Comunale, Mariarosaria, 2022. "A panel VAR analysis of macro-financial imbalances in the EU," Journal of International Money and Finance, Elsevier, vol. 121(C).

    More about this item

    Keywords

    Financial intermediation; Foreign Direct Investment; emerging economies; privatization;
    All these keywords.

    JEL classification:

    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • G20 - Financial Economics - - Financial Institutions and Services - - - General
    • L30 - Industrial Organization - - Nonprofit Organizations and Public Enterprise - - - General
    • O10 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - General

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:gat:wpaper:1532. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Nelly Wirth (email available below). General contact details of provider: https://edirc.repec.org/data/gateefr.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.