NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

A Portfolio Approach to a Cross-Sectoral and Cross-National Investment Strategy in Transition Economies

Willem H. Buiter, Ricardo Lago, Helene Rey

NBER Working Paper No. 5882
Issued in January 1997
NBER Program(s):   IFM   ME

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 behavior 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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Document Object Identifier (DOI): 10.3386/w5882

Published: The Economics of Transition, Vol.5, no.1 (1997), pp.63-96.

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