SIMULATING SHORT, INTERMEDIATE, AND LONG RUN EFFECTS OF PRIVATE INVESTMENT ON EMPLOYMENT BY INDUSTRIAL GROUPINGS

Our study examines the crowding-in/out effect of foreign direct investment and government expenditure on private domestic investment for 15 members of the Southern African Development Community (SADC) for the period 1991–2019. The study employed the panel Pool Mean Group (PMG)/ARDL technique in estimating the short-run and long-run cointegration relationships between FDI, government capital expenditure and domestic private investment and adds three more variables for control purposes (interest rate, GDP growth rate and trade openness). For the full sample, FDI crowds-in domestic investment whilst government crowds-out domestic investment. However, in performing a sensitivity analysis, in which the sample was segregated into low and high income economies, both FDI and government investment crowd-in domestic investment whilst government expenditure crowds-out domestic investment in lower income SADC countries with no effect of FDI on domestic investment. Policy implications are discussed.

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Impact of Public Debt, Deficit and Debt Financing on Private Investment in a Large Country: Evidence from the United States

World Journal of Applied Economics ◽

10.22440/wjae.6.2.3 ◽

2020 ◽

Vol 6 (2) ◽

pp. 139-161

Author(s):

Amir Kia

Keyword(s):

Public Debt ◽

Public Investment ◽

Government Expenditure ◽

Private Investment ◽

Adjustment Costs ◽

The United States ◽

Direct Impact ◽

Large Country ◽

Long Run ◽

Short Run

This paper analyses the direct impact of fiscal variables on private investment. The current literature ignores one or more fiscal variables and, in many cases, the foreign financing of debt. In this paper, an aggregate investment function for an economy in which firms incur adjustment costs in their investment process is developed. The developed model incorporates the direct impact of government expenditure, public debt and investment, deficits and foreign-financed debt on private investment. The model is tested on US data. It is found that public investment does not have any impact on private investment, but government expenditure, deficit, debt and foreign-financed debt crowd out private investment over the long run. However, deficit crowds in the private investment over the short run.

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The nexus between economic institutions and unemployment: evidence from sub-Saharan Africa

International Journal of Development Issues ◽

10.1108/ijdi-03-2020-0048 ◽

2020 ◽

Vol ahead-of-print (ahead-of-print) ◽

Author(s):

Abdullahi Abdulhakeem Kilishi ◽

Hammed Adesola Adebowale ◽

Sodiq Abiodun Oladipupo

Keyword(s):

Panel Data ◽

Private Investment ◽

Developed Countries ◽

Sub Saharan Africa ◽

Economic Institutions ◽

Male And Female ◽

Content Type ◽

Long Run ◽

Sub Saharan ◽

Ssa Countries

Purpose This paper aims to investigate the nexus between economic institutions (EI) and unemployment in sub-Saharan African (SSA) countries. Specifically, the paper examines the impact of aggregate EI and ten different components of institutions on total, male and female unemployment in SSA. Design/methodology/approach The paper used unbalanced panel data of 37 SSA countries covering the period between 1995 and 2018. A dynamic heterogenous panel data model is specified for the study. Two alternative estimation techniques of dynamic fixed effect and pool mean group methods were used to estimate the models. The choice of appropriate method is based on Hausman specification test. Findings The findings reveal that aggregate EI and institutions related to the monetary system, trade flows, government spending and fiscal process significantly lead to less unemployment in the long-run. However, there is no evidence of a significant relationship between EI and unemployment in the short-run. These findings are consistent for total, male and female unemployment, respectively. Practical implications To reduce unemployment significantly in the long run, policymakers in SSA need to build more market-friendly institutions that will incentivize private investment, allow free movement of labour and goods, as well as guarantee a stable macroeconomic environment and efficient fiscal system. Originality/value Most of the existing studies focused on the influence of labour market institutions on unemployment ignoring the effects of other forms of institutions. While available studies on the link between institutions and unemployment used either OECD or other developed countries sample, with scanty evidence from Africa. However, the effects of EI could vary across regions. Thus, generalizing the findings from developed countries for SSA countries and other developing countries may be misleading. Hence, this paper contributes to the existing literature by examining the nexus between different types of EI and unemployment using the SSA sample.

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Public and Private Investment and Economic Growth: An Empirical Investigation

Studia Universitatis Babe-Bolyai Oeconomica ◽

10.2478/subboec-2018-0010 ◽

2018 ◽

Vol 63 (2) ◽

pp. 87-106 ◽

Cited By ~ 2

Author(s):

Garikai Makuyana ◽

Nicholas M. Odhiambo

Keyword(s):

Economic Growth ◽

Positive Impact ◽

Public Investment ◽

Private Investment ◽

Current Debate ◽

Annual Data ◽

Public And Private ◽

Long Run ◽

Short Run ◽

Crowd Out

Abstract This paper provides new evidence to contribute to the current debate on the relative impact of public and private investment on economic growth and the crowding effect between the two components of investment in South Africa. Using annual data from 1970 to 2017, the study applies the recently developed Autoregressive Distributed Lag (ARDL)-bounds testing approach to cointegration. The study finds that private investment has a positive impact on economic growth both in the long run and short run, while public investment has a negative effect on economic growth in the long run. Further, in the long run, gross public investment is found to crowd out private investment, while its infrastructural component is found to crowd in private investment. The results of the study also reveal that both gross public investment and non-infrastructural public investment crowd out private investment in the short run. Overall, the study finds private investment to be more important than public investment in the South African economic growth process and that the importance of infrastructural public investment in stimulating private investment in the long run cannot be over-emphasized.

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Does public investment crowd-out private investment in India

Journal of Financial Economic Policy ◽

10.1108/jfep-02-2016-0016 ◽

2017 ◽

Vol 9 (1) ◽

pp. 50-69 ◽

Cited By ~ 5

Author(s):

Shanmugam Muthu

Keyword(s):

Public Investment ◽

Private Investment ◽

Infrastructure Investment ◽

Public Infrastructure ◽

Public And Private ◽

Content Type ◽

Macroeconomic Uncertainty ◽

Long Run ◽

Short Run

Purpose The purpose of this paper is to examine the crowding-in or crowding-out relationship between public and private investment in India. Design/methodology/approach The autoregressive distributed lag (ARDL) bounds testing approach is used to estimate the long run relationship between public and private investment using annual data from 1971-1972 to 2009-2010. Findings Based on the empirical findings, it is observed that aggregate public investment has a positive effect on private investment both in the long run and the short run. In contrast to the findings of previous studies, no significant impact of public infrastructure investment on private investments is found in the long run, while non-infrastructure investment has a positive impact on private investment in the short run. Among the various categories of infrastructure sector, a positive and significant impact in the case of electricity, gas and water supply is observed. Similarly, the result indicates that public investment in machinery and equipment and construction have substantially influenced the private sector machinery and equipment in the long run and the short run. In the case of the role of macroeconomic uncertainty, the results find a negative and significant impact on private investment and the impact is higher in the short run than in the long run. Originality/value The present study extends the literature in three important ways: First, the study attempts to capture heterogeneity of public investment as well as disaggregate effects of two different categories of public infrastructure on private investment. The extent to which two different types of public assets impact the private investment in machinery and equipment investment is also examined. Second, ARDL model is used to examine the long-run relationship between public and private investment. Third, the study incorporates macroeconomic uncertainty into the empirical analysis to examine the role of macroeconomic volatility in determining private investment decision.

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REGIONAL CONVERGENCE OF ECONOMIC GROWTH DURING POST-REFORM PERIOD IN INDIA

The Singapore Economic Review ◽

10.1142/s021759081450012x ◽

2014 ◽

Vol 59 (02) ◽

pp. 1450012 ◽

Cited By ~ 4

Author(s):

JAGANNATH MALLICK

Keyword(s):

Economic Growth ◽

Growth Models ◽

Public Investment ◽

Private Investment ◽

Club Convergence ◽

Conditional Convergence ◽

Indian States ◽

Middle Income ◽

The Public ◽

Long Run

This paper examines the club-convergence and conditional convergence of economic growth of the major 15 states in India over the periods from 1993–1994 to 2004–2005 by using dynamic fixed effect growth models. The result finds that there is club-convergence within the middle income states. There is also evidence of the convergence of per capita income among Indian states by conditioning private investment and public investment along with other factors of economic growth. This paper is innovative in separating the significance of private investment from the public investment in the long-run dynamics of income in Indian states. This paper suggests that regional disparity in income can be reduced by equitable allocation of private investment and equitable distribution of public investment.

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Impact of Foreign Capital on Economic Development in India: An Econometric Investigation

Global Business Review ◽

10.1177/0972150917692198 ◽

2017 ◽

Vol 18 (3) ◽

pp. 766-780 ◽

Cited By ~ 11

Author(s):

Kalpana Sahoo ◽

Narayan Sethi

Keyword(s):

Economic Growth ◽

Economic Development ◽

Foreign Capital ◽

Negative Impact ◽

Positive Impact ◽

Private Investment ◽

Series Data ◽

Domestic Investment ◽

Long Run ◽

Foreign Private Investment

The present study empirically investigates the long-run causal relationship between foreign capital and economic development in India by using the annual time-series data from 1990–1991 to 2013–2014. The study uses some selected macroeconomic variables such as per capita government expenditure on education (PcGEE, as an indicator of economic development), gross domestic product (GDP, as an indicator of economic growth), gross capital formation (GCF, as an indicator of domestic investment), official development assistance (ODA, as an indicator of foreign official inflows) and foreign direct investment (FDI, as an indicator of foreign private investment) for its empirical analysis. By using the cointegration test and the vector vector-error correction model (VECM) technique, this study finds that in the long run, domestic investment has shown a significant and positive impact on economic development, whereas, ODA, FDI and GDP have shown a significant negative impact on it. It concludes that domestic investment, foreign capital along with economic growth have a significant impact on economic development in India in long run. It suggests that the national developmental policy of India should focus on the productive utilization of both domestic and foreign capital along with it should give emphasis on effective transformation of growth benefits towards development process.

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A Test of the validity of Crowding-out (or- in) hypothesis: A new examination of link between public borrowing and private investment in Emerging Europe

Croatian Operational Research Review ◽

10.17535/crorr.2021.0008 ◽

2021 ◽

Vol 12 (1) ◽

pp. 91-103

Author(s):

Mehmed Ganic ◽

Lejla Hodzic ◽

Ognjen Ridic

Keyword(s):

Public Debt ◽

Private Investment ◽

Transition Countries ◽

Crowding Out ◽

Debt Burden ◽

Distributed Lag ◽

Autoregressive Distributed Lag ◽

Pooled Mean Group ◽

Long Run ◽

Short Run

This study seeks to test the existence of the crowding-out (or- in) hypothesis in a sample of 17 Emerging Europe countries divided in two panels. The study employs a panel autoregressive distributed lag (ARDL) model based on three estimators, Mean Group Estimator (MG), Pooled Mean Group (PMG) and Dynamic Fixed Effect (DFE), in order to evaluate the of stability of short run and long run coefficients using consistently compiled public borrowing and private investment data between 2000 and 2019. The empirical findings of the paper generally confirm the existence of a crowding out effect in both long run and short run in European post-transition countries, and in the long run for European transition countries. More specifically, elasticity of private investment with respect to public debt is greater in the European transition countries than in the European post-transition countries. However, the findings on the crowding out (in) effect of government spending and economic growth on private investment are mixed and conflicting in both the long run and the short run. Accordingly, the study recommends that selected countries should reassess their austerity agendas employed for lowering debt levels, and follow new strategies for managing public debt burden.

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Determinants of Private Investment in Pakistan

Journal of Economic Impact ◽

10.52223/jei0301212 ◽

2020 ◽

Vol 2 (3) ◽

pp. 86-92

Author(s):

Muhammad Suleman ◽

Abdur Rehman ◽

Haroon Javaid

Keyword(s):

Growth Rate ◽

Public Sector ◽

Time Series Data ◽

Trade Openness ◽

Private Investment ◽

Series Data ◽

Distributed Lag ◽

Long Run ◽

Domestic Savings ◽

Short Run

Private investment has a significant relation with the economic growth of the country. It plays an important role in reduction of unemployment and poverty by promoting efficiency and competition among the firms. This study is an attempt to investigate the determinants of private investment in Pakistan. For this purpose, time-series data is utilized for the period 1974-2013. The ARDL (Auto Regressive-Distributed Lag) modeling technique of co-integration was employed to estimate the short-run and long-run determinants of private investment in Pakistan. Empirical findings of this study indicated that in the short-run private investment in Pakistan is determined by the growth rate of GDP, public sector investment, and domestic savings. While in the long run it is determined by the official exchange rate, the growth rate of GDP, public sector investment, domestic savings, trade openness, and interest rate. The results also revealed that in the case of Pakistan different political regimes (democratic, non-democratic) have no significance in the determination of private investment. Stability tests of CUSUM and (CUSUMSQ) (Cumulative Sum Control Chart) were performed in this study. These tests indicated a stable, long run as well as short-run structural stability of the model.

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Public / Private Investment Linkages: A Multivariate Cointegration Analysis

The Pakistan Development Review ◽

10.30541/v44i4iipp.805-817 ◽

2005 ◽

Vol 44 (4II) ◽

pp. 805-817

Author(s):

Abdul Rashid

Keyword(s):

Public Investment ◽

Empirical Studies ◽

Private Investment ◽

Developed Countries ◽

Cointegration Analysis ◽

Public And Private ◽

Empirical Results ◽

Long Run ◽

Stable Association ◽

The Developed Countries

The issue of whether public investment crowds out or crowds in private investment has received considerable attention in the economic literature. Most of the empirical studies that examined the long run stable association between public and private investment have focused on examining this relationship for the developed countries with very little attention on the developing countries. The empirical results of these studies, however, are highly controversial. The existing empirical studies in this area can be divided into three categories. The studies in the first category including Barro (1974), Kormendi (1983), and Feldstein (1982) have examined the empirical implications of the Ricardian equivalence hypothesis (REH). The empirical results of most of the studies in this category were supportive of the REH. Seater (1993) argues that good empirical studies generally provide evidence in support of the REH; however, some studies refute it owing to the lake of econometric accuracy.

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