Investment in Emerging Markets We Are Not in Kansas Anymore…Or Are We?

April 3, 2015

Preview Citation

Format: Chicago

Nicolas E Magud, and Sebastian Sosa. Investment in Emerging Markets We Are Not in Kansas Anymore…Or Are We?, (USA: International Monetary Fund, 2015) accessed September 18, 2024

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

We document that (i) although private investment growth in emerging markets has decelerated in recent years, it came down from cyclical highs and remains close to pre-crisis trends; and (ii) investment-to-output ratios generally remain close to or above historical averages. We show that investment is positively related to expect future profitability, cash flows and debt flows, and negatively associated with leverage. Critically, it is also positively related to (country-specific) commodity export prices and capital inflows. Lower commodity export prices and expected profitability, a moderation in capital inflows, and increased leverage account for the bulk of the recent investment deceleration.

Subject: Balance of payments, Capital inflows, Commodity prices, Currencies, Export prices, Money, National accounts, Prices, Private investment

Keywords: Asia and Pacific, Capital expenditure, Capital inflows, Cash flow, Commodity export price, Commodity prices, Cost of capital, Currencies, EM firm, Emerging markets, Export prices, Financial constraint, Financial constraints, Investment, Investment decision, Mid-sized firm, Private investment, Study emerging market company, WP

Publication Details

Pages:

31
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2015/077
Stock No:

WPIEA2015077
ISBN:

9781475534221
ISSN:

1018-5941

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