Financial Constraints: Lessons from the Portuguese Monetary Integration

Financial constraints are a determinant factor that hinders firms' ability to carry out their investment growth. This chapter aims at analysing the impact of financial constraints upon Portuguese firms over the period 1996-2004, which covers the implementation and convergence towards the common currency. It is well known that firms in economies with less developed financial markets suffer from more severe financial constraints. This is particularly true for the Portuguese economy, as well as transition economies such as Serbia. Several lessons may be learned from the Portuguese case and its past experience of Monetary integration. Our main results indicate that Monetary integration seems to have generally helped reducing the degree of financial constraints faced by Portuguese firms, even though firms were affected differently, depending on their degree of openness to foreign markets.