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Do Public Expenditure and Macroeconomic Uncertainty Matter to Private Investment? Evidence from Pakistan

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Author Info
Imtiaz Ahmed (Planning Commission of Pakistan)
Abdul Qayyum (Pakistan Institute of Development Economics, Islamabad)

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Abstract

This study examines the role of macroeconomic uncertainty and public expenditure in determining private fixed investment in Pakistan. It is found that individual series are nonstationary. There is a long-run relationship between private fixed investment, public consumption expenditure, public development expenditure, and market activities. It is revealed that public development expenditure stimulates private investment, whereas public consumption expenditure is detrimental to private investment. The preferred dynamic private fixed investment function confirms that in the short run, public development expenditure enhances private investment. Moreover, macroeconomic instability and uncertainty depresses private investment in Pakistan.

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File URL: http://www.pide.org.pk/pdf/PDR/2007/Volume2/145-161.pdf
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Publisher Info
Article provided by Pakistan Institute of Development Economics in its journal The Pakistan Development Review.

Volume (Year): 46 (2007)
Issue (Month): 2 ()
Pages: 145-161
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Handle: RePEc:pid:journl:v:46:y:2007:i:2:p:145-161

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Related research
Keywords: Private Investment; Public Expenditure; Macroeconomic Uncertainty; Co-integration; Pakistan;

Find related papers by JEL classification:
E22 - Macroeconomics and Monetary Economics - - Macroeconomics: Consumption, Saving, Production, Employment, and Investment - - - Capital; Investment; Capacity

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

  1. Ghura, Dhaneshwar & Goodwin, Barry, 2000. "Determinants of Private Investment: A Cross-Regional Empirical Investigation," Applied Economics, Taylor and Francis Journals, vol. 32(14), pages 1819-29, November. [Downloadable!] (restricted)
  2. Looney, Robert E., 1997. "Infrastructure and private sector investment in Pakistan," Journal of Asian Economics, Elsevier, vol. 8(3), pages 393-420. [Downloadable!] (restricted)
  3. Mehdi S. Monadjemi, 1996. "Public Expenditure And Private Investment: A Study of Three OECD Countries," Studies in Economics 9601, Department of Economics, University of Kent.
  4. Dickey, David A & Fuller, Wayne A, 1981. "Likelihood Ratio Statistics for Autoregressive Time Series with a Unit Root," Econometrica, Econometric Society, vol. 49(4), pages 1057-72, June. [Downloadable!] (restricted)
  5. B Ouattara, 2004. "Modelling the Long Run Determinants of Private Investment in Senegal," The School of Economics Discussion Paper Series 0413, Economics, The University of Manchester. [Downloadable!]
  6. Khan, Mohsin S & Kumar, Manmohan S, 1997. "Public and Private Investment and the Growth Process in Developing Countries," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 59(1), pages 69-88, February.
  7. Pereira, Alfred M. & Roca-Sagales, Oriol, 2001. "Infrastructures and private sector performance in Spain," Journal of Policy Modeling, Elsevier, vol. 23(4), pages 371-384, May. [Downloadable!] (restricted)
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Ahmad, Imtiaz & Qayyum, Abdul, 2008. "Effect of Government Spending and Macro-Economic Uncertainty on Private Investment in Services Sector: Evidence from Pakistan," MPRA Paper 11673, University Library of Munich, Germany. [Downloadable!]
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