scholarly journals The Impact of OFDI and Institutional Quality on Domestic Capital Formation at the Disaggregated Level: Evidence for Developed and Emerging Countries

2020 ◽  
Vol 12 (9) ◽  
pp. 3661
Author(s):  
Waqar Ameer ◽  
Kazi Sohag ◽  
Helian Xu ◽  
Musaad Mansoor Halwan
Keyword(s):  
Emerging Economies ◽  
Institutional Quality ◽  
Private Investment ◽  
Public Capital ◽  
Developed Countries ◽  
Capital Formation ◽  
Emerging Countries ◽  
Private Capital ◽  
Domestic Capital ◽  
Private And Public

In this study, we investigate whether outbound foreign direct investment (OFDI) either augments or impedes domestic public and private investment, incorporating the role of institutional quality into the context of developed and emerging countries. To this end, we apply a cross-sectional-autoregressive-distributed lag (CS-ARDL) approach to analyze panel data from the period 1996–2017. Our empirical findings suggest that OFDI augments private capital formation for developed countries. Institutional quality (IQ) is found to be a driving factor that promotes private capital formation in the established economies of developed countries. However, OFDI has a negative association with the public capital formation in the established economies of developed countries, while IQ has a positive association with it. In the context of emerging economies, OFDI is found to be too insignificant to have an effect on private and public capital formation. Interestingly, IQ has a detrimental effect on both private and public capital formation in emerging economies. Our findings are robust. The empirical findings of this study imply that institutional quality should continue to be improved in developed countries, while it should surpass a certain threshold for emerging economies to promote domestic capital formation.

scholarly journals On the Substitution of Private and Public Capital in Production

2019 ◽  
Vol 19 (232) ◽  
Author(s):  
Zidong An ◽  
Alvar Kangur ◽  
Chris Papageorgiou
Keyword(s):  
Production Function ◽  
Public Capital ◽  
Physical Capital ◽  
Elasticity Of Substitution ◽  
Point Estimate ◽  
Private Capital ◽  
Public And Private ◽  
Macroeconomic Models ◽  
Private And Public ◽  
Penn World Table

Most macroeconomic models assume that aggregate output is generated by a specification for the production function with total physical capital as a key input. Implicitly this assumes that private and public capital stocks are perfect substitutes. In this paper we test this assumption by estimating a nested-CES production function whereas the two types of capital are considered separately along with labor as inputs. The estimation is based on our newly developed dataset on public and private capital stocks for 151 countries over a period of 1960-2014 consistent with Penn World Table version 9. We find evidence against perfect substitutability between public and private capital, especially for emerging and LIDCs, with the point estimate of the elasticity of substitution estimated closely around 3.

scholarly journals Long term relationship between exports, gross domestic capital formation, transfer fund allocation, and private investment in Jambi Province

2021 ◽  
Vol 8 (6) ◽  
pp. 631-650
Author(s):  
Sayid Syekh ◽  
Zainuddin Zainuddin
Keyword(s):  
Impulse Response Function ◽  
Private Investment ◽  
Capital Formation ◽  
Vector Error Correction ◽  
Current Period ◽  
Long Run ◽  
Domestic Capital ◽  
Long Time ◽  
The Impact

This study investigates the relationship between Jambi export with gross domestic capital formation, allocation of transfer funds, and private investment, based on the Vector Error Correction Model (VECM). The results show that, both in the short and long term, the gross domestic capital formation, allocation of transfer funds, and private investment can explain changes in Jambi exports. The gross domestic capital formation strongly influences Jambi's export fluctuations compared to other variables. There is a disequilibrium relationship in the short term, and it becomes equilibrium in the long run. Only 69 percent of export changes can be determined in the current period, and the rest is determined in other periods. Likewise, the gross domestic capital formation, only 38 percent, can be determined in the current period, and the rest is determined in other periods. Based on the impulse response function, the impact of export shocks has a large impact on itself. Shocks have a very significant impact and have a long lead to stable levels. Shocks can cause changes in Jambi exports to gross domestic capital formation. Shocks to the formation of gross domestic capital formation require a long time to reach a stable level.

scholarly journals IMPORTANCE OF FOREIGN DIRECT INVESTMENTS (FDI) IN KOSOVO AND CREATION OF FAVORABLE POLICIES IN ATTRACTING THEM

2019 ◽  
Vol 30 (6) ◽  
pp. 1607-1609
Author(s):  
Feim Brava
Keyword(s):  
Foreign Direct Investment ◽  
Direct Investment ◽  
Developed Countries ◽  
Emerging Countries ◽  
Foreign Direct Investments ◽  
Fiscal Policies ◽  
Institutional Policies ◽  
Domestic Capital ◽  
Domestic Investments

Domestic investments are essential to develop of each country, but sometimes insufficient, in most countries that aim for sustainable and long-term growth. Hence, most countries, and Kosovo, have a continuing need for additional capital, which, with adequate institutional policies, can be provided through Foreign Direct Investment (FDI).While in developed countries there are debates about and against FDI (especially about the type of FDI when an investment can be made from domestic capital), in underdeveloped and developing countries there is a consensus on the need for FDI to meet the need for investments that can not be realized through local investment.Several emerging countries and Kosovo have made constant efforts to increase these investments but have faced significant problems in attracting foreign investors. Disadvantaged institutional policies, including monopoly policies and fiscal policies, have been one of the limiting factors.This paper aims at analyzing current policies related to attracting FDI and identifying and analyzing institutional policies that are facilitating FDI, but the main focus will be on current and potential policies that can will negatively impact on FDI withdrawal. At the end of the paper, some conclusions will be drawn based on research on the current situation as well as some recommendations on policies that may advance attracting Foreign Direct Investment (FDI).

Basic Channels

2012 ◽  
Author(s):  
Pierre-Richard Agénor
Keyword(s):  
Private Investment ◽  
Public Capital ◽  
Crowding Out ◽  
Private Capital ◽  
Complementarity Effect ◽  
Overlapping Generations Model ◽  
The Core ◽  
Basic Model ◽  
Social Welfare Maximization ◽  
Optimal Fiscal Policy

This chapter begins by focusing on “conventional” channels through which public capital is deemed to affect growth, namely, productivity, complementarity, and crowding-out effects. It presents a basic two-period Allais–Samuelson Overlapping Generations model, which is extended in subsequent chapters to address a host of other issues. At the core of this model is a production function in which public capital is complementary to private capital. Several extensions of the basic model are then considered, including indirect taxation, a complementarity effect operating through the efficiency of private investment, an effect of public capital on household utility, and maintenance expenditure. The chapter also provides a discussion of optimal fiscal policy, which is studied from the perspective of growth maximization by a benevolent government, rather than in terms of social welfare maximization.

Speed of Price Adjustment towards Market Efficiency: Evidence from Emerging Countries

2018 ◽  
Vol 17 (1_suppl) ◽  
pp. S112-S135 ◽  
Author(s):  
Parthajit Kayal ◽  
S. Maheswaran
Keyword(s):  
Emerging Economies ◽  
Developed Countries ◽  
Emerging Countries ◽  
Model Specification ◽  
Price Adjustment ◽  
Standard Errors ◽  
Bootstrap Procedure ◽  
Price Adjustments ◽  
Stock Indices ◽  
Empirical Framework

The speed with which stock markets adjust to information and news flow into asset prices is of importance to investors, regulators and policymakers. In this article, we provide a simple and uniform empirical framework involving the use of a volatility measure to compare the speeds of adjustment in index prices in response to all available market information. The stock indices of 23 major emerging economies are compared with 10 mature stock indices from developed countries with reference to the speed of their price adjustments. We find that the index prices of developed countries adjust faster when compared to those of emerging countries. Our findings are independent of any GARCH specification and are also robust to potential mistakes in the model specification because we make use of a fully empirical bootstrap procedure to compute the standard errors. We also rank the countries in terms of the speed of index price adjustment. The results show that the random walk effect is generic and exists in all price indices.

scholarly journals A Biological Theory of Social Discounting

2014 ◽  
Vol 104 (11) ◽  
pp. 3481-3497 ◽  
Author(s):  
Arthur J. Robson ◽  
Balázs Szentes
Keyword(s):  
Group Selection ◽  
Public Capital ◽  
Rate Of Return ◽  
Private Capital ◽  
Trade Offs ◽  
Social Discounting ◽  
Private And Public ◽  
Private Savings ◽  
Saving Decisions ◽  
Individual Choices

We consider a growth model in which intergenerational transfers are made via stocks of private and public capital. Private capital is the outcome of individuals' private savings while decisions regarding public capital are made collectively. We hypothesize that private saving choices evolve through individual selection while public saving decisions are the result of group selection. The main result of the paper is that the equilibrium rate of return to private capital is at least 2–3 percent more than the rate of return to public capital. In other words, social choices involving intertemporal trade-offs exhibit much more patience than individual choices do. (JEL D11, D71, D91, H43)

The Optimal Distribution Rule of Federal Funds to States in India: A Suggested Methodology

2021 ◽  
pp. 227797872198992
Author(s):  
Ajitava Raychaudhuri ◽  
Poulomi Roy
Keyword(s):  
Public Investment ◽  
Private Investment ◽  
Public Capital ◽  
Time Frame ◽  
Capital Formation ◽  
Horizontal Equity ◽  
Inequality Aversion ◽  
Vertical Equity ◽  
Distribution Rules ◽  
Distribution Rule

A federal country like India distributes centrally collected funds through certain distribution rules, framed by the finance commission every five years, which primarily aims at horizontal equity among the states, although the goal of vertical equity has also been accommodated lately. The distribution rules do change, but they are largely governed by population and taxable capacity in a static sense. As a result, this brings some horizontal equity in the stated time frame but misses the root cause of inequity among states. This highlights the importance of the dynamics of growth of per capita income of the states which depends on public capital formation since private investment is complementary to public investment. This also raises the issue of time preference along with the attitude towards inequality aversion on the part of individuals in different states in India, which determines the savings that set the limits to private capital formation. This helps one to estimate the optimal value of public capital in a state which would ensure certain predetermined growth target along with inclusivity. If the finance commission could accommodate in its distribution rule the development gap of each state in terms of actual and optimal public capital as mentioned, the horizontal as well as vertical equity can be pursued in a sustainable manner since this addresses both inequity among and within states over time.

scholarly journals Fertilizer market in Russia: state and direction of development

2021 ◽  
Vol 83 (1) ◽  
pp. 375-384
Author(s):  
V. M. Kruchinina ◽  
S. M. Ryzhkova
Keyword(s):  
Agricultural Sector ◽  
Crop Yields ◽  
Private Investment ◽  
Developed Countries ◽  
Fertilizer Application ◽  
Domestic Demand ◽  
Agricultural Producers ◽  
Analysis And Synthesis ◽  
Private And Public ◽  
The Cost

Fertilizers are used all over the world to maintain the sustainability of the agricultural sector and food security. A balanced application of fertilizers increases crop yields, while increasing the amount of food and enriching the soil with essential nutrients. Russia is one of the leading producers of fertilizers, which is due to sufficient natural reserves. The study of the domestic fertilizer market, its state and prospects are considered in the aggregate of the production base, logistics and marketing features, the ways of further development are outlined using such scientific methods as: observation, analysis and synthesis, abstraction and comparison, monographic. The global fertilizer market is highly competitive. Russia not only occupies a strong position in it, but also provides domestic demand. But the level of fertilizer application in Russia is lower than in developed countries, which suggests an increase in the need for fertilizers in the future. Therefore, the further expansion of the domestic market is associated with the development of the material and technical base of agricultural producers, who need not only funds for the purchase of fertilizers, but also equipment for their application. To stimulate domestic demand, it is necessary to encourage private investment in every possible way, to use public-private and public-cooperative partnerships in creating the infrastructure of the fertilizer market; expand the range of fertilizers at the expense of the brand range, attract small agricultural producers, peasant (farmer) farms and households to the market. It is necessary to create conditions for the organization of cooperatives to supply small farms with fertilizers, which will reduce the cost of purchasing them and will contribute to increasing production and increasing the availability of food products, and thus achieve the goal of the agricultural sector in the context of broader macroeconomic objectives of society – improving the quality of life of the population.

The impact of debt service costs and public debt on private capital formation in South Africa

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Sheunesu Zhou
Keyword(s):  
South Africa ◽  
Public Debt ◽  
Private Investment ◽  
Capital Formation ◽  
Debt Service ◽  
Private Capital ◽  
Content Type ◽  
Debt Overhang ◽  
The Impact ◽  
The Relationship

PurposeThe aim of this paper is to analyse the relationship between public debt, corporate debt service costs and private capital formation in South Africa.Design/methodology/approachTo capture the long-run characteristic of investment, the study adopts the Fully Modified Ordinary Least Squares approach and tests for cointegration using Hansen (1992)'s Parameter Instability test.FindingsWe find that private capital formation increases in domestic debt and decreases in external debt during the pre-crisis period. However, during the period post the Global Financial Crisis, we find evidence of domestic public debt crowding out private capital formation, whereas external debt crowds-in capital formation. Debt service costs are found to reduce investment due to the effect of the debt overhang throughout the period under analysis.Research limitations/implicationsThe paper has important implications for macroeconomic policy. In particular, there is need for deleveraging and allocation of a higher proportion of debt to public infrastructure expenditure which has complementary effects on private investment.Practical implicationsDebt overhang signal that South African firms could be over-leveraged, which hinders future growth prospects. Firms that face high levels of debt should consider debt restructuring.Originality/valueEmpirical studies undertaken to explore this relationship have yielded contradicting results suggesting that the relationship between public debt and private investment is heterogeneous depending on a given economy or prevailing macroeconomic environment. In particular, existing research does not provide evidence on whether recent increases in public debt in South Africa have led to crowding-in or crowding-out of private investment. This paper therefore contributes to empirical literature on the impact of public debt on private investment within a small open economy.

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