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Effect of Government Spending and Macro-Economic Uncertainty on Private Investment in Services Sector: Evidence from Pakistan

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  • Ahmad, Imtiaz
  • Qayyum, Abdul

Abstract

This study examines the effect of government spending and macroeconomic uncertainty on private fixed investment in services sector of the Pakistan for the period from 1972 to 2005. We first investigated time series properties of data then estimated long run model using cointegration technique. The results show that government spending and interest rate affect private investment in services sector in Pakistan. The preferred short-run dynamic investment function indicates that increase in government current spending and interest rate discourages private investment and similarly macroeconomic instability and uncertainty affect the private investment negatively.

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Bibliographic Info

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 11673.

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Date of creation: Aug 2008
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Handle: RePEc:pra:mprapa:11673

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Keywords: Private Investment; Government Expenditure; Macroeconomic uncertainty; Services Sector; Co-integration; Pakistan;

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References

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  1. George, Anita & Morisset, Jacques & DEC, 1993. "Does price uncertainty really reduce private investment? A small model applied to Chile," Policy Research Working Paper Series 1114, The World Bank.
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  7. David Stasavage, 2000. "Private Investment and Political Uncertainty," STICERD - Development Economics Papers - From 2008 this series has been superseded by Economic Organisation and Public Policy Discussion Papers 25, Suntory and Toyota International Centres for Economics and Related Disciplines, LSE.
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  17. 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.
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Cited by:
  1. Ahmed, Shahzad & Ahmed, Waqas & Khan, Sajawal & Pasha, Farooq & Rehman, Muhammad, 2012. "Pakistan Economy DSGE Model with Informality," MPRA Paper 53135, University Library of Munich, Germany.
  2. Amber Fatima & Abdul Waheed, 2011. "Effects of Macroeconomic Uncertainty on Investment and Economic Growth: Evidence from Pakistan," Transition Studies Review, Springer, vol. 18(1), pages 112-123, September.
  3. Shahid Ali & Naved Ahmad, 2010. "The Effects of Fiscal Policy on Economic Growth: Empirical Evidences Based on Time Series Data from Pakistan," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 49(4), pages 497–512.
  4. Ahmad, Imtiaz & Qayyum, Abdul, 2009. "Role of Public Expenditures and Macroeconomic Uncertainty in Determining Private Investment in Large Scale Manufacturing Sector of Pakistan," MPRA Paper 29268, University Library of Munich, Germany.

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