Article ID Journal Published Year Pages File Type
963707 Journal of International Money and Finance 2007 16 Pages PDF
Abstract
We develop an open-economy model to demonstrate how saving, aid and direct investment inflows affect investment under asymmetric information. The model that relates a firm's net worth to investment suggests that the relative impact of these financial sources depends on a country's income level, financial structure, and governance infrastructure. We estimate the impact of each source using panel data for 64 developing countries. The results provide support for the view that net worth matters, and suggest that the influence of financial systems can explain why saving-investment correlations are high for developed countries and lower for developing countries.
Related Topics
Social Sciences and Humanities Economics, Econometrics and Finance Economics and Econometrics
Authors
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