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Effect of Interest Rate Subsidies on Firm Performance and Investment Behavior during Economic Recession: Evidence from V ietnam
Author(s) -
Dinh TuanMinh,
Malesky Edmund,
To TrungThanh,
Nguyen DucThanh
Publication year - 2013
Publication title -
asian economic journal
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.345
H-Index - 28
eISSN - 1467-8381
pISSN - 1351-3958
DOI - 10.1111/asej.12009
Subject(s) - subsidy , recession , business cycle , real estate , economics , interest rate , stimulus (psychology) , monetary economics , stock (firearms) , finance , business , labour economics , macroeconomics , market economy , mechanical engineering , psychology , psychotherapist , engineering
This paper aims to quantitatively evaluate the microeconomic consequences of the 4‐percent interest rate subsidy program, the main component of the V ietnamese Government's economic stimulus package in 2009, which was intended to assist recovery from the global economic and financial recession. Our analyses based on the Provincial Competitive Index 2009 survey and accounting data of firms listed on V ietnam's two stock exchanges show that firms that received subsidized loans were more likely to increase labor, to expand investment and to possess optimistic business plans. However, we find evidence that not all business activity generated by the stimulus led to productivity increases: a non‐trivial proportion of subsidized loans were not used to invest in production or expansion, but for speculative activities such as real estate and stock market trading.