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The Causal Relationship between Private and Public Investment in Zimbabwe

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  • Muyambiri, Brian
  • Chiwira, Oscar
  • Enowbi Batuo, Michael
  • Chiranga, Ngonidzashe
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    Abstract

    The study examines the relationship between private and public investment in Zimbabwe utilizing yearly time series data for the period 1970 to 2007. Emphasis is placed on the direction of causality and the effect of the two types of investment on each other. The paper constructs empirical models for both private and public investment, based on the flexible accelerator theory. Private investment is found to be cointegrated with public investment. A cointergration approach and VEC model are employed to assess the short run relationship existing between public and private investment. The relationship between private and public investment is found to be insignificant and the direction of causality found to be unidirectional. The results support the notion that private investment precedes public investment.

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    File URL: http://mpra.ub.uni-muenchen.de/26671/
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    Bibliographic Info

    Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 26671.

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    Date of creation: Jul 2010
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    Handle: RePEc:pra:mprapa:26671

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    Keywords: Private Investment; Public Investment; Causality; Flexible Accelerator Theory; Zimbabwe;

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