Public and Private Investment and Economic Growth: An Empirical Investigation

2018 ◽  
Vol 63 (2) ◽  
pp. 87-106 ◽  
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.

scholarly journals Effect of Public Investment on Private Investment: Evidence from Ethiopia

2022 ◽  
Vol 3 (1) ◽  
Author(s):  
Temesgen Merga
Keyword(s):  
Economic Growth ◽  
Positive Impact ◽  
Public Investment ◽  
Private Investment ◽  
Crowding Out ◽  
Bounds Testing ◽  
Policy Makers ◽  
Long Run ◽  
Short Run ◽  
Ardl Bounds Testing Approach

This study examined the effect of public investment on private investment and their relative effects on Ethiopia economic growth. The study employed the ARDL bounds testing approach. The empirical results revealed that public investment has a crowding-in effect on private investment in the long run which means, public investment stimulates private investment in the long run. However, the study revealed that public investment has a crowding out effect on private investment. In the other word, public investment has no direct impact on economic growth in the long run. However, private investment has a significant positive impact on economic growth in the long run while it is negatively related to economic growth in the short run. This suggests that private investment positively contributes to economic growth more than public investment. In addition, economic growth is positively associated with private investment although it is statistically insignificant in the long run. This implies that it is prudent for policy makers not to cut back on the efficient component of public investment and increase infrastructural public investment to a level that promotes private investment in the long run thereby indirectly fostering economic growth.

scholarly journals Crowding-in or Crowding-out? Modelling the Relationship between Public and Private Fixed Capital Formation Using Co-integration Analysis: The Case of Pakistan 1964-2000

2002 ◽  
Vol 41 (3) ◽  
pp. 255-276 ◽  
Author(s):  
Naveed H. Naqvi
Keyword(s):  
Economic Growth ◽  
Positive Impact ◽  
Public Investment ◽  
Unit Roots ◽  
Private Investment ◽  
Annual Data ◽  
Public And Private ◽  
Fixed Capital Formation ◽  
Private And Public ◽  
The Relationship

This paper uses the Co-integrating VAR’s [Johansen (1988); Ericsson, et al. (1998)] to examine the relationship between economic growth, public investment, and private investment in the presence of unit roots. Exogeneity is not implicitly assumed but explicitly tested for, and evidence of co-integration and feedback between public and private investment leads to a model in the form of a parsimonious VAR. The analysis is conducted using 37 years of annual data for Pakistan. The analysis suggests that public investment has a positive impact on private investment, and that economic growth drives both private and public investment as predicted by the accelerator-based models.

scholarly journals HIGHER EDUCATION AND ECONOMIC GROWTH A CASE STUDY OF PAKISTAN

2010 ◽  
Vol 27 (1) ◽  
Author(s):  
Tariq Mahmood
Keyword(s):  
Higher Education ◽  
Economic Growth ◽  
Positive Impact ◽  
Public Expenditures ◽  
Annual Data ◽  
Unequal Distribution ◽  
Long Run ◽  
Short Run ◽  
The Impact ◽  
Education And Economic Growth

This paper highlights the role of higher education for the economic growth inPakistan. We explore the impact of increase in enrolment at tertiary level on thegrowth rate of income per worker. Estimating a growth model developed byMankiv et. al. (1992), using the annual data of Pakistan, we find a robustrelationship between higher education and economic growth in the long run. Themodel has also shown that investment in fixed capital has positive impact oneconomic uplift. Applying Johansen’s cointegration test, we show that the longrun elasticity of income with respect to capital stock is different from its share inGDP, and increase in the enrolment per unit of effective worker helps inbolstering economic growth. But, like earlier literature we also find statisticallyinsignificant relationship between higher education and GDP per worker. Thereare some fundamental reasons concerning to the ambiguous impact of investingin human capital on economic growth, particularly in the short run in case ofPakistan. First, the sharp increase in enrollment, recently, has been damaging thequality of education. Second, the unequal distribution of educational services hasheld back the efficiency of public expenditures, particularly before the reformsundertaken by higher education commission. Third, the low private return ofeducation has limited the demand for higher education in Pakistan for almost fiftyyears.

Does public investment crowd-out private investment in India

2017 ◽  
Vol 9 (1) ◽  
pp. 50-69 ◽  
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.

Impact of Public and Private Infrastructure Investment on Economic Growth: Evidence from India

2020 ◽  
Vol 12 (2) ◽  
pp. 119-138
Author(s):  
Nishija Unnikrishnan ◽  
Thomas Paul Kattookaran
Keyword(s):  
Economic Growth ◽  
Public Investment ◽  
Impulse Response Function ◽  
Decomposition Analysis ◽  
Private Investment ◽  
Infrastructure Investment ◽  
Public Infrastructure ◽  
Public And Private ◽  
Long Run ◽  
The Impact

Literature presents contradictory views regarding the impact of public and private investment on the economic growth of a country. India being a developing country, where the major share of investment is by public sector, the question which props up is what among public and private investment is contributing more towards the economic growth of the country. In this framework, the gross domestic product (GDP) can be fairly explained as a function of public infrastructure investment and private infrastructure investment. Johansen’s co-integration was used to test the long-run relationship between the variables over the period from 1961–1962 to 2016–2017. A vector error correction model (VECM) along with an impulse response function and variance decomposition analysis was done to measure the impact of public infrastructure investment and private infrastructure investment on the GDP. Based on the empirical evidence discussed earlier, it was evident that both public and private infrastructure investments have a significant impact on the economic growth of the nation. Findings which came up in this study correlate to majority findings of past literature that, when compared with public investment, it is private investment which is capable of giving a better impetus to economic growth.

scholarly journals Infrastructural Investments and Economic Growth: Evidence from Pakistan

2021 ◽  
Vol 7 (3) ◽  
Author(s):  
Muhammad Ayub ◽  
Rabia Rasheed ◽  
Rashid Ahmad ◽  
Furrukh Bashir
Keyword(s):  
Economic Growth ◽  
Time Series Data ◽  
Private Investment ◽  
Series Data ◽  
Water Projects ◽  
Public And Private ◽  
The Public ◽  
Long Run ◽  
Short Run ◽  
Adf Test

Purpose: The goal of this study is to make an attempt to find out the relationships between infrastructural investments and economic growth. Design/Methodology/Approach: The study employs time series data over the years from 1972 to 2020. To observe the long-run and short-run impact of infrastructural investments on economic growth, an ARDL modeling approach to co- integration is used that is most suitable technique over some other techniques of integration after inspecting the stationary level of data via ADF test. Findings: The findings of the study indicate that Investments on Railways, Roads, Gas Projects, Telecommunication, Water Projects and Power Projects appear as efficient factors for enhancing economic growth of Pakistan in the long run. Implications/Originality/Value: It is suggested that government should increase the public and private investment for development of Railways, Roads, Telecommunication and Water projects in Pakistan.

Financial development and economic growth: empirical evidence from India

2015 ◽  
Vol 32 (3) ◽  
pp. 340-356 ◽  
Author(s):  
Madhu Sehrawat ◽  
A K Giri
Keyword(s):  
Economic Growth ◽  
Financial Development ◽  
Positive Impact ◽  
Annual Data ◽  
Content Type ◽  
Distributed Lag ◽  
Long Run ◽  
Integration Test ◽  
Short Run ◽  
Sustainable Economic Growth

Purpose – The purpose of this paper is to examine the relationship between financial development and economic growth in India using annual data from 1982 to 2012. Design/methodology/approach – The stationarity properties are checked by ADF, DF-GLS, KPSS and Ng–Perron unit root tests. The long- and short-run dynamics are examined by using the autoregressive distributed lag (ARDL) approach to co-integration. Findings – The co-integration test confirms a long-run relationship in financial development and economic growth for India. The analysis of ARDL test results reveals that both bank-based and market-based indicators of financial development have a positive impact on economic growth in India. Hence, the results support the supply-leading hypothesis and highlight the importance of financial development in economic growth. The findings also indicate that the Indian bank-centric financial sector has the potential for economic growth through credit transmission. Research limitations/implications – The present study recommends appropriate reforms in financial markets to attain sustainable economic growth. The findings are useful for policy-makers who want to maintain a parallel expansion of financial development and growth. Originality/value – To date, there are hardly any studies that use both market-based and bank-based indicators as proxies of financial development and analyze their role in economic growth in India. So, the contribution of the paper is to fill this gap in literature.

scholarly journals Does Fiscal Policy stimulate Economic Growth in Ethiopia? An ARDL Approach

2021 ◽  
Author(s):  
Solomon Tilahun Mengistu
Keyword(s):  
Economic Growth ◽  
Fiscal Policy ◽  
Public Investment ◽  
Government Expenditure ◽  
Private Investment ◽  
Future Research ◽  
Tax Revenue ◽  
Annual Data ◽  
Distributed Lag ◽  
Long Run

Abstract Abstract In recent years, a vast literature has appeared on the relationship between fiscal policy and long-run economic growth. With the aim of give an overview of the recent discussion and establish a point of departure for future research, this study used time series techniques and used empirical model by Kneller et al (1999) and Bleaney et al (2000) to investigate the link between various components of fiscal policy on Ethiopia’s economic growth on annual data for the period 1985/86 – 2019. It employed the autoregressive distributed lag estimation technique. Results from the bound tests showed that there was a long-run relationship between the variables. Disaggregating government expenditure into productive and unproductive and tax revenue into distortionary and non-distortionary, this study found unproductive expenditure and non-distortionary tax revenue to be neutral to growth as predicted by economic theory. Moreover, productive expenditure has positive effect on growth while there was evidence of distortionary effects on growth of distortionary taxes. These results give right signal to policy makers in Ethiopia in formulating expenditure and tax policies to ensure unproductive expenditures are reduced while at the same time boosting public investment. Furthermore, there is need to encourage private investment in the country.

scholarly journals Private and Public Investment Linkages: Some Evidence Using Sectoral Level Data

2020 ◽  
Vol 16 ◽  
Author(s):  
Umbreen Zahra ◽  
◽  
Hajra Ihsan
Keyword(s):  
Time Series Data ◽  
Public Investment ◽  
Positive Association ◽  
Private Investment ◽  
Series Data ◽  
Public And Private ◽  
Agriculture Sector ◽  
Long Run ◽  
Short Run ◽  
The Government

This study empirically investigates the relationship between public and private investment in Pakistan at the aggregate and sectoral level, including the sectors of Agriculture, Manufacturing, Finance, Construction, Transport & Communication and Mining & Quarrying. For this purpose, annual time series data is utilized from 1971 to 2019 except for the Agriculture sector covering the period of 1981-2019 as data for previous years is not available from any published sources. Multivariate co-integration approach and ECM are employed to empirically analyze the existence of long-run and short-run association among public and private investment. The results indicate a long run complementary type relationship of public investment with private investment at both the aggregate and sectoral level except for the Finance sector. The short-run analysis supports this long-run positive association at an aggregate level and four sectors, excluding Transport & Communication and Agriculture sector where the results were insignificant. Our results and generally declining share of public investment highlight that the government is playing its role as an “enabler” (or facilitator) of private investment in terms of association between public and private investment.

Fish Exports and Economic Growth: The Pakistan’s Experience

2019 ◽  
Vol 20 (2) ◽  
pp. 279-296 ◽  
Author(s):  
Syed Tehseen Jawaid ◽  
Mohammad Haris Siddiqui ◽  
Zeeshan Atiq ◽  
Usman Azhar
Keyword(s):  
Economic Growth ◽  
Time Series Data ◽  
Positive Impact ◽  
Impulse Response Function ◽  
Policy Implications ◽  
Sensitivity Analyses ◽  
Series Data ◽  
Distributed Lag ◽  
Long Run ◽  
Short Run

This study attempts to explore first time ever the relationship between fish exports and economic growth of Pakistan by employing annual time series data for the period 1974–2013. Autoregressive distributed lag and Johansen and Juselius cointegration results confirm the existence of a positive long-run relationship among the variables. Further, the error correction model reveals that no immediate or short-run relationship exists between fish exports and economic growth. Different sensitivity analyses indicate that initial results are robust. Rolling window analysis has been applied to identify the yearly behaviour of fish exports, and it remains negative from 1979 to 1982, 1984 to 1988, 1993 to 1999, 2004 and from 2010 to 2013, and it shows positive impact from 1989 to 1992, 2000 to 2003 and from 2005 to 2009. Furthermore, the variance decomposition method and impulse response function suggest the bidirectional causal relationship between fish exports and economic growth. The findings are beneficial for policymakers in the area of export planning. This study also provides some policy implications in the final section.

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