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

32 Pages Posted: 5 May 2015

See all articles by Nicolás E. Magud

Nicolás E. Magud

International Monetary Fund (IMF)

Sebastiàn Sosa

International Monetary Fund (IMF) - Western Hemisphere Department

Date Written: April 2015

Abstract

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.

Keywords: Private investments, Emerging markets, Commodities, Export prices, Capital inflows, Econometric models, financial constraints, commodity prices, capital inflows., debt, commodity export, cash flow, cash flows, output, investment decisions

JEL Classification: E20, E30, F30, F40

Suggested Citation

Magud, Nicolas E. and Sosa, Sebastian, Investment in Emerging Markets We are Not in Kansas Anymore…Or are We? (April 2015). IMF Working Paper No. 15/77, Available at SSRN: https://ssrn.com/abstract=2602676

Nicolas E. Magud (Contact Author)

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

Sebastian Sosa

International Monetary Fund (IMF) - Western Hemisphere Department ( email )

700 19th Street NW
Washington, DC 20431
United States

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