Abstract

This article examines the determinants of private investment in Brazil from sectorial industry data of 1996 to 2010. The series of gross fixed capital ormation, commonly used in empirical studies of aggregate investment eliminates irregular adjustments of individual production units due to the aggregation process. Using the industry’s sectorial data it is possible to avoid smoothing in this aggregate series and it may help to understand aggregated investment dynamics. The results reveal the importance of the volume of available funds for investment with the complementarity between public and private investment. The results also indicate that the real high interest rates prevailing in the market did not affect the private sector’s investment negatively during the considered period. The investment financing alternative from own resources and subsidized credit seems to be more important. As expected, economic instability adversely affected private investment during this period.

Key words: Panel data, private investment, fixed effects, capital formation.