Les Liaisons dangereuses: a Minskyan approach to the relation of credit and investment in Argentina during the 1990s

ARZA, VALERIA Y ESPAÑOL, PAULA

Pisa, Italia.

Workshop; LEM (Laboratory of Economics and Management) Seminars; 2009

Scuola Sant Anna

We classify firms according to their financial behaviour in the short term usinga Minskyan taxonomy that classifies firms as Hedge, Speculative and Ponzi. Wemeasure financial constraints across that taxonomy using panel-data for Argentinaduring 1992–2001. After controlling for profitability we find that firms with anoppressed financial structure in the short term had to rely on their internal funds forlong-term investment. We interpret this finding from a Minskyan/Keynesianframework arguing that credit allocation followed conventional rules about thequality of borrowers and not necessarily about the quality of the project. Because ofbeing a highly unstable country, Argentinean firms’ quality is defined on a shorttermbasis.