An empirical analysis of a Keynesian investment theory using Brazilian firm-level panel data

This study utilizes a Post Keynesian theoretical model of investment behavior and firm-specific data from Brazilian firms to examine the role that sales, sales growth, financing costs, and internal cash flow play in the investment decisions of firms. In a broad sense, our results are similar to earlier studies that have found some inconsistencies in the relationship between either sales or cash flow and firm investment. Our study suggests even a model based on the Keynesian investment theory will not accurately predict firm behavior in chaotic economic and financial conditions. However, it can provide a foundation for such decisions.