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

ARZA, VALERIA & ESPAÑOL, PAULA

CAMBRIDGE JOURNAL OF ECONOMICS

Oxford University Press

Lugar: Oxford; Año: 2008 vol. 32 p. 725 - 737

0309-166X

We classify firms according to their financial behaviour in the short term using a Minskyan taxonomy that classifies firms as Hedge, Speculative and Ponzi. We measure financial constraints across that taxonomy using panel-data for Argentina during 1992–2001. After controlling for profitability we find that firms with an oppressed financial structure in the short term had to rely on their internal funds for long-term investment. We interpret this finding from a Minskyan/Keynesian framework arguing that credit allocation followed conventional rules about the quality of borrowers and not necessarily about the quality of the project. Because of being a highly unstable country, Argentinean firms’ quality is defined on a short-term basis.