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Discussion Paper Details

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Title: A Portfolio Approach to a Cross-sectoral and Cross-National Investment Strategy in Transition Economies

Author(s): Willem H. Buiter, Ricardo Lago and Hélène Rey

Publication Date: January 1997

Keyword(s): Enterprise Performance, Macroeconomic environment, Portfolio Choice, Provisioning and Transition Economies

Programme Area(s): Transition Economics

Abstract: This paper takes a systematic look at the portfolio choice problem faced by investment banks or funds investing in transition economies. We relate the performance of projects in the transition economies to the broader macroeconomic and international environment, which affect the project through its input-output structure and its financial balance sheet. Among the macroeconomic determinants of enterprise behaviour we consider are productivity growth, real wage growth, movements in the international terms of trade, shocks to the relative price of traded and non-traded goods, domestic and foreign interest rates, currency depreciation and the rate of inflation. We evaluate the attractiveness of alternative investment strategies and provisioning rules from the perspective of portfolio theory.

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Bibliographic Reference

Buiter, W, Lago, R and Rey, H. 1997. 'A Portfolio Approach to a Cross-sectoral and Cross-National Investment Strategy in Transition Economies'. London, Centre for Economic Policy Research. https://cepr.org/active/publications/discussion_papers/dp.php?dpno=1548