scholarly journals PUBLIC, PRIVATE AND FOREIGN INVESTMENT NEXUS IN THE REPUBLIC OF NORTH MACEDONIA: CROWDING-IN OR OUT EFFECT?

2021 ◽  
Author(s):  
Vesna Garvanlieva Andonova ◽  
◽  
Keyword(s):  
Public Investment ◽  
Private Investment ◽  
Annual Data ◽  
Crowding Out ◽  
Foreign Direct Investments ◽  
The Public ◽  
Distributed Lag ◽  
Private Investments ◽  
Short Run ◽  
The Government

In the last two decades the economic growth of North Macedonia can be qualified as sluggish and volatile. In this period, the government has been proclaiming a narrative of fiscal and economic policies focused on public investment driven development and growth, yet the capital budget bias, has been significant with regularly overestimated plans vs. the outturn. The public investment-to-GDP ratio, has been an average 5.47%, ranging from minimum 4.0% (Y2007) to maximum 6.7% (Y2010). Simultaneously, the private investment-to-GDP ratio has been an average 17.1%, with minimum of 15% (in Y2005) and a maximum value of 20.6% (in Y2008). The FDI inflows, have been ranging from minimal below 1% in 2014 to maximum 12.7% in 2001, with average of 4.6% per annum. The trends of the variables straightforwardly do not suggest a nexus between public and private investments i.e. causing crowding-in or crowding out effect. In this paper it is investigated whether public investment and foreign direct investments crowd-out or crowd-in the private investment in North Macedonia. To test this hypothesis, we use the available annual data on private investment, public investment, foreign direct investments and GDP for the period of 2000-2017 (in real terms). A model of autoregressive distributed lag bound testing is used for the variables private investment, public investment, GDP and foreign direct investment. The results indicate a crowding-out effect of public over private investments with significance of the foreign direct investments are expected to show whether there is crowding-in or -out effect of the public over private investment and crowding-in effect of the foreign direct investments. The crowding-out effect is immediate and short run.

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 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

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.

scholarly journals Is the Private Sector more Productive than the Public Sector?

1991 ◽  
Vol 30 (4II) ◽  
pp. 721-729
Author(s):  
Khwaja Sarmad
Keyword(s):  
Developing Countries ◽  
Public Sector ◽  
Private Sector ◽  
Public Investment ◽  
Empirical Work ◽  
Empirical Support ◽  
Private Investment ◽  
Total Production ◽  
The Public ◽  
The Government

In developing countries the rapid growth of the public sector during the past few decades was viewed as an important means for accelerating the pace of economic growth. In most developing countries the public sector now accounts for a prominent share of total production and investment. But the contribution of the public sector to growth has been much below expectations. In many cases public enterprises require large subsidies from the government and impose a significant fiscal burden on the economy, which leads to the notion that the private sector is much more productive than the public sector. However, little empirical work has been done in this field so that the proposals that emphasize the private sector vis-a-vis the public sector rest largely on theoretical considerations. Recent work by Khan and Reinhart (1990) is an important exception. Using cross-section data for the seventies of 24 developing countries they show that the arguments favouring the private sector in adjustment programmes have empirical support. Khan and Reinhart estimate a growth model in which the effect of private and public investment on growth is separated. A comparison of the marginal productivities of the two types of investment allows them to conclude that "all in all, there does seem to be some merit in the key role assigned to private investment in the development process by supporters of market -based strategies". [Khan and Reinhart (1990), p. 25.]

The Crowding-in/ out Debate in Investments in India: Fresh Evidence from NARDL Application

2020 ◽  
Vol 9 (2) ◽  
pp. 167-189
Author(s):  
Nusrat Akber ◽  
Megha Gupta ◽  
Kirtti Ranjan Paltasingh
Keyword(s):  
Public Investment ◽  
Private Investment ◽  
Household Savings ◽  
Real Rate ◽  
Jel Codes ◽  
Macroeconomic Uncertainty ◽  
Long Run ◽  
Private Investments ◽  
Short Run ◽  
Nonlinear Autoregressive

The purpose of the study is to re-examine the issue of the crowding-in/out effect of public investment on private investment by adopting an improved methodology of the ‘nonlinear autoregressive distributive lag’ (NARDL) model. Taking data from 1970 to 2016, the study finds that public investment crowds-in private investment both in the long-run as well as the short-run. However, the short-run elasticity is statistically more significant and larger in magnitude than the long-run elasticity. It has also been found that macroeconomic uncertainty significantly affects private investment both in the long-run and the short-run. Among other determinants of private investment, we observe foreign direct investment (FDI) inflow, credit flow to the private sector, household savings, real rate of interest and expected output affect private investment significantly. The policy implication of the study calls for the designing of public sector policies that enthuse more private investments. More credit flow to private sectors and FDI in different sectors of the economy should be prioritized. JEL Codes: E22, H54, C32

scholarly journals The Impact of Public Investment on Private Investment: Evidence from India

2016 ◽  
Vol 41 (4) ◽  
pp. 288-307 ◽  
Author(s):  
Pradyumna Dash
Keyword(s):  
Structural Breaks ◽  
Public Investment ◽  
Structural Break ◽  
Private Investment ◽  
Crowding Out ◽  
Base Line ◽  
Public Infrastructure ◽  
Executive Summary ◽  
Short Run ◽  
The Impact

Executive Summary This paper estimates the impact of public investment on private investment in India during 1970-2013 using ARDL procedure developed by Pesaran and Shin (1999) and Pesaran, Shin, and Smith (2001) by incorporating endogenously determined structural break in the model. The base line result implies that a 1 per cent increase in public investment as a ratio to GDP leads to 0.81 per cent and 0.53 per cent decrease in private investment as a ratio to GDP in the long run (about 4 to 5 years) and short run (about 2 to 3 years), respectively, after controlling for economic conditions. To address the concern that the results may be driven by government consumption expenditure, fiscal deficit, or inadequate infrastructure, the analysis was repeated by estimating the investment function after including these variables and similar results were obtained. The investment regression was also estimated for a shorter sample period (1978–2013) to get the same result. It is observed that the crowding out effect of public investment on private investment has dampened during the post-liberalization period. The results also reveal that a “market friendly” incumbent and an increase in foreign direct investment dampen the magnitude of the crowding out effect of public investment. Formal tests were conducted to examine whether the crowding out effect was driven by political uncertainty and political business cycle channels but no evidence for the same is found. The results also reveal that public infrastructure (represented by kms of roads per capita) has a positive effect on private investment in the short run. This is similar to the findings by Blejer and Khan (1984) that while public infrastructure investment is complementary to private investment, other kinds of public investment lead to crowding out of private investment. This suggests that public investment should be more focused on goods and services which are enjoyed or consumed by many consumers simultaneously and non-excludable in nature with significant positive externalities. In this model, a single endogenously determined structural break was included and the possibility of multiple breaks was excluded. There is a scope to increase multiple structural breaks and re-investigate the impact of public investment on private investment in India in future studies.

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 Democracy, Globalization and Private Investment in Ghana

2017 ◽  
Vol 19 (1) ◽  
pp. 1-20 ◽  
Author(s):  
Samuel Kwabena Obeng ◽  
Linda Akoto ◽  
Felicia Acquah
Keyword(s):  
Exchange Rate ◽  
Interest Rate ◽  
Public Investment ◽  
Civil Liberties ◽  
Trade Openness ◽  
National Income ◽  
Exchange Rate Volatility ◽  
Private Investment ◽  
Distributed Lag ◽  
Short Run

The article examines the effects of democracy and globalization on private investment in Ghana for the period 1980–2012, using the autoregressive distributed lag (ARDL) bounds test for cointegration and the error correction model (ECM). Two models are used. In Model 1, democracy is proxy by an index for institutional quality (Polity 2), while Model 2 uses an index for civil liberties as proxy for democracy. The results for Model 1 show globalization and public investment increase private investment, while exchange rate volatility and trade openness decrease private investment in both the long and short run. In addition, national income and interest rate reduce private investment in the short run. In the case of Model 2, credit to the private sector and public investment increase private investment, while exchange rate volatility and trade openness decrease private investment in both the long and short run. Finally, national income and interest rate reduce private investment in the short run. The findings and policy recommendations of the article provide vital information for policy implementation in Ghana.

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.

Crowd-in Effect of Highway Capital on Private Investment in the United States

2021 ◽  
pp. 036119812110179
Author(s):  
Bingxin Yu ◽  
Valentin Vulov
Keyword(s):  
United States ◽  
Private Sector ◽  
Public Investment ◽  
Private Investment ◽  
The United States ◽  
Sensitivity Analyses ◽  
Infrastructure Investment ◽  
Annual Data ◽  
Crowding Out ◽  
Private Sector Investment

This paper examines the impacts of public transportation infrastructure investment on private investment and whether public infrastructure investment tends to “crowd in” or “crowd out” private investment. “Crowding in” refers to situations where public investment encourages private sector investment, whereas “crowding out” refers to situations where public investment discourages private sector investment. This analysis applies the vector autoregression (VAR) methodology for an empirical study. Using national-level annual data from 1947 to 2017 in the United States, estimation results suggest that public investment in highways tends to crowd in private investment after an initial and temporary crowding-out effect. Most of the positive impacts on private investment accrue within 3 years after the initial public investment. The incremental impact diminishes almost completely after roughly 10 years. Alternative model specifications and sensitivity analyses further confirm the robustness of the model specification by yielding consistent and positive crowd-in effects within the first 3 to 5 years after the public investment.

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.

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