Financial Liberalization, Credit Constraints, and Collateral: Investment in the Mexican Manufacturing Sector

41 Pages Posted: 3 May 1999

See all articles by Gaston Gelos

Gaston Gelos

Bank for International Settlements; Centre for Economic Policy Research (CEPR)

Alejandro M. Werner

International Monetary Fund (IMF)

Multiple version iconThere are 2 versions of this paper

Date Written: March 1999

Abstract

This paper examines the impact of financial liberalization on fixed investment in Mexico, using establishment-level data from the manufacturing sector. It analyzes changes in cash-flow sensitivities and uses an innovative approach to explore the role of real estate as collateral and deal with a potential censoring problem. The results suggest that financial constraints were eased for small firms but not for large ones. However, banks' reliance on collateral in their lending operations increased the importance of real estate. The results provide microeconomic evidence consistent with the role attributed to financial accelerator mechanisms during lending booms and during recessions that stem from financal crises.

Keywords: investment, financial constraints, collateral, real estate, lending booms, panel data, fixed-effects tobit

JEL Classification: E44, E22, G14, O16

Suggested Citation

Gelos, R. Gaston and Werner, Alejandro M., Financial Liberalization, Credit Constraints, and Collateral: Investment in the Mexican Manufacturing Sector (March 1999). IMF Working Paper No. 99/25, Available at SSRN: https://ssrn.com/abstract=157910

R. Gaston Gelos (Contact Author)

Bank for International Settlements ( email )

Centralbankplatz 2
Basel, 4002
Switzerland
0612808201 (Phone)

HOME PAGE: http://https://www.bis.org/author/gaston_gelos.htm

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

Alejandro M. Werner

International Monetary Fund (IMF) ( email )

700 19th Street NW
Washington, DC 20431
United States

Do you have negative results from your research you’d like to share?

Paper statistics

Downloads
229
Abstract Views
1,990
Rank
242,250
PlumX Metrics