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Cambridge Journal of Economics Advance Access published online on April 9, 2008
Cambridge Journal of Economics, doi:10.1093/cje/ben007
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© The Author 2008. Published by Oxford University Press on behalf of the Cambridge Political Economy Society. All rights reserved.

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

Valeria Arza and Paula Español*

Address for correspondence: Valeria Arza, CONICET – CENIT, Callao 796 6to piso CP: 1023, Ciudad de Buenos Aires, Argentina; email: varza{at}fund-cenit.org.ar. Paula Español, EHESS-CEP, Av. Julio A. Roca 651—5°, sect. 22, (C1067AAB) Ciudad de Buenos Aires, Argentina; email: pespan{at}mecon.gov.ar

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.

Key Words: Minsky • speculation • investment • finance • firm behaviour • Argentina

JEL classifications: C23, D21, O16, O54

Manuscript received April 1, 2005; final version received January 31, 2008.


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