Effect of Interest Rate Subsidies on Firm Performance and Investment Behavior during Economic Recession: Evidence from Vietnam |
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Authors: | Tuan‐Minh Dinh Edmund Malesky Trung‐Thanh To Duc‐Thanh Nguyen |
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Institution: | 1. Vietnam Centre for Economic and Policy Research, , Hanoi, Vietnam;2. Department of Political Science, Duke University, , Durham, NC, 27708 USA;3. Faculty of Economics, National Economics University, , Ha Noi, Vietnam |
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Abstract: | This paper aims to quantitatively evaluate the microeconomic consequences of the 4‐percent interest rate subsidy program, the main component of the Vietnamese 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 Vietnam'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. |
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Keywords: | interest rate subsidy firm performances firm investment behavior Vietnamese economy E65 H25 D21 C25 |
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