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The Determinants of the Long Term Private Investment in Brazil: An Empyrical Analysis Using Cross-section and a Monte Carlo Simulation

Author

Listed:
  • Tadeu, Hugo

    (Fundação Dom Cabral, Belo Horizonte, Brazil)

  • Tasso, Jersone

    (Fumec, Belo Horizonte, Brazil)

Abstract

Empirical studies regarding the determinants of private investment in developing countries, including Brazil, have demonstrated the high inflation’s rates negative impact on investment. However, the recent Brazilian’s experience clearly shows that stabilization is not capable of recovering investment’s rates. Therefore, the objectives of this study are: a) to analyze the long term private investment’s determinants in Bra zil; b) analyze if the Brazilian economy has been impacted by the crowding-in or crowding-out effetcs; and c) analyze the macronomic variables’ behavior during the 2012 to 2017 period. In order to do this, we used a cross section econometric analysis and a Monte Carlo Simulation for the data analysis. The paper presents the main investment theories, and recent developments of these theories, as well as how they can be applied to the Brazilian data. The results show evidences of a public investment crowding-in effect in infrastructure over the private investment. All the analyzed variables’ signs are consistent with the theory, with the exception of the real interest’s rates, where the coefficient is positive and insignificant in the estimated equation. The reduction in the credit’s volume and the existence of political and economic instabilities showed that they are harmful to private investment in the analyzed period. The implementation of public policies in order to guarantee economic stability and improve the government’s credibility, along with the increase of credit offer, could boost private investment in Brazil.

Suggested Citation

  • Tadeu, Hugo & Tasso, Jersone, 2013. "The Determinants of the Long Term Private Investment in Brazil: An Empyrical Analysis Using Cross-section and a Monte Carlo Simulation," Journal of Economics, Finance and Administrative Science, Universidad ESAN, vol. 18(00), pages 11-17.
    • Handle: RePEc:ris:joefas:0058
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    Citations

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    Cited by:

    1. Samuel Kwaku Agyei, 2017. "Explaining public investment dynamics in Sub-Saharan Africa: The role of country governance structures," Cogent Economics & Finance, Taylor & Francis Journals, vol. 5(1), pages 1323987-132, January.
    2. Akçay Selçuk & Karasoy Alper, 2020. "Determinants of private investments in Turkey: Examining the role of democracy," Review of Economic Perspectives, Sciendo, vol. 20(1), pages 23-49, March.
    3. Dinh Thanh, Su & Hart, Neil & Canh, Nguyen Phuc, 2020. "Public spending, public governance and economic growth at the Vietnamese provincial level: A disaggregate analysis," Economic Systems, Elsevier, vol. 44(4).

    More about this item

    Keywords

    Cross-section; Private investment; Monte Carlo method; Crowding-in effect; Crowding-out effect;
    All these keywords.

    JEL classification:

    • A10 - General Economics and Teaching - - General Economics - - - General

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