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Private investment in developing countries: The effects of commodity shocks and uncertainty

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  • Jan Dehn
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    Abstract

    The link between ex post discrete shocks and private investment have never been formally tested in a panel data context, while the evidence of a link between ex ante commodity price uncertainty and investment is weak. This paper constructs measures of discrete shocks and uncertainty using a new multi-country data set of aggregate commodity price indices, and tests the relationship between various manifestations of commodity price variability and private investment rates within the context of a canonical empirical investment model estimated on a sample of 44 developing countries. The analysis confirms theoretical predictions that positive ex post commodity price shocks have strong positive effects on private investment rates in low income developing countries, conditional upon the level of commodity prices. It is also shown that the prospect of uncertain future commodity prices andex post negative shocks do not affect private investment rates.

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    File URL: http://www.csae.ox.ac.uk/workingpapers/pdfs/20-11text.pdf
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    Bibliographic Info

    Paper provided by Centre for the Study of African Economies, University of Oxford in its series CSAE Working Paper Series with number 2000-11.

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    Date of creation: 2000
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    Handle: RePEc:csa:wpaper:2000-11

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    Cited by:
    1. Shaun K. Roache, 2006. "Domestic Investment and the Cost of Capital in the Caribbean," Applied Econometrics and International Development, Euro-American Association of Economic Development, vol. 6(3).
    2. Shaun K. Roache, 2006. "Domestic Investment and the Cost of Capital in the Caribbean," IMF Working Papers 06/152, International Monetary Fund.
    3. Misati, Roseline Nyakerario & Nyamongo, Esman Morekwa, 2011. "Financial development and private investment in Sub-Saharan Africa," Journal of Economics and Business, Elsevier, vol. 63(2), pages 139-151, March.
    4. Lutfi Erden & Randall G. Holcombe, 2006. "The Linkage Between Public and Private Investment: A Co-integration Analysis of a Panel of Developing Countries," Eastern Economic Journal, Eastern Economic Association, vol. 32(3), pages 479-492, Summer.
    5. Mellati, Ali, 2008. "Uncertainty and investment in private sector: An analytical argument and a review of the economy of Iran," MPRA Paper 26655, University Library of Munich, Germany.

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