Additionality of countercyclical credit: a cost-effectiveness analysis of the Investment Maintenance Program (PSI)

Abstract

The Investment Maintenance Program (PSI) was structured by the Brazilian Government in 2009, with the explicit aim of stopping the aggregate investment plummet, observed in the first semester of that year. With an expressive budget, this program has recently received much attention in the Brazilian economic debate, with several authors questioning its capacity to boost investments, since the gross fixed capital formation (GFCF) has not recovered its pre-crisis level. Using information available at the firm level, this paper aims to contribute to the debate by evaluating the impact of PSI on the investment level of firms – focusing on the industrial sector. The identification strategy adopted for this purpose was based on two complementary matching estimators: the Propensity Score Matching (PSM) and the Conditional Differences-in- -Differences Matching (DIDM). The data used came from the Annual Industrial Survey (PIA) of the Brazilian Institute of Geography and Statistics (IBGE) on economic activities of industrial firms for the 2007-2010 period and from the BNDES records on industrial firms receiving PSI financing in the 2009-2010 period. The empirical results showed a positive impact of PSI on the firms’ investment level, even though its magnitude declined between 2009 and 2010. The cost-effectiveness analysis also showed a decreasing pattern over this period.