Financial Liberalization, Credit Constraints, and Collateral: Investment in the Mexican Manufacturing Sector
IMF Working Papers, March 1, 1999
Source details
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- Financial Liberalization, Credit Constraints, and Collateral: Investment in the Mexican Manufacturing Sector
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Bibliographic details
- Authors: Gaston Gelos, Alejandro M. Werner
- Published: March 1, 1999
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781451844245.001
Summary and purpose
- Examines the impact of financial liberalization on fixed investment in Mexico using establishment-level data from the manufacturing sector.
- Analyzes changes in cash-flow sensitivities.
- Uses an innovative approach to explore the role of real estate as collateral and to address a potential censoring problem.
- Provides microeconomic evidence consistent with the role attributed to “financial accelerator” mechanisms during lending booms and during recessions that stem from financial crises.
Key findings
- Financial constraints were eased for small firms but not for large ones.
- Banks’ reliance on collateral in their lending operations increased the importance of real estate.
- Results are consistent with financial accelerator mechanisms operating during lending booms and during recessions that stem from financial crises.
Methodology and empirical approach
- Uses establishment-level panel data from the manufacturing sector.
- Analyzes changes in cash-flow sensitivities to assess shifts in credit constraints.
- Employs an innovative technique to measure the role of real estate as collateral and to deal with a potential censoring problem (details in the full paper).
Subject areas and keywords
- Subject: Collateral, Credit, Currencies, Econometric analysis, Estimation techniques, Financial crises, Financial institutions, Money
- Keywords: capital stock, cash flow, collateral, collaterizable net worth, cost of capital, Credit, credit rationing, Currencies, establishment level, Estimation techniques, exporting firm, financial constraints, financial situation, firm level, fixed-effects tobit, investment, investment project, lending booms, panel data, real estate, single-establishment firm, WP