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Role of Public Expenditures and Macroeconomic Uncertainty in Determining Private Investment in Large Scale Manufacturing Sector of Pakistan

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  • Ahmad, Imtiaz
  • Qayyum, Abdul

Abstract

Considering the importance of large scale manufacturing sector in Pakistan economy we analysed investment behavior of private sector in large scale manufacturing. The main emphasis in this paper has been to explore the role of public expenditures development and non development) and macroeconomic uncertainty in determining private sector’s fixed investment in large scale manufacturing. It is found that most of the series are non-stationary and there is one cointegrating relationship between the private investment, public consumption expenditures, public development expenditures and size of market. The dynamic ECM model of private investment indicates public development expenditures enhance the private investment whereas non-development expenditures and macroeconomic uncertainty negatively affect private investment.

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Bibliographic Info

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 29268.

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Date of creation: 2009
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Handle: RePEc:pra:mprapa:29268

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Keywords: Private Investment; Public Expenditures; Macroeconomic-uncertainty; Largescale; Cointegration; ecrror correction; pakistan Manufacturing; Cointegration; Pakistan.;

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  1. Aschauer, David Alan, 1989. "Does public capital crowd out private capital?," Journal of Monetary Economics, Elsevier, Elsevier, vol. 24(2), pages 171-188, September.
  2. 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.
  3. Alicia H. Munnell, 1992. "Policy Watch: Infrastructure Investment and Economic Growth," Journal of Economic Perspectives, American Economic Association, vol. 6(4), pages 189-198, Fall.
  4. Mario I. Blejer & Mohsin S. Khan, 1984. "Government Policy and Private Investment in Developing Countries (Politique des pouvoirs publics et investissement privé dans les pays en développement) (Política estatal e inversión priva," IMF Staff Papers, Palgrave Macmillan, vol. 31(2), pages 379-403, June.
  5. Joshua Greene & Delano Villanueva, 1991. "Private Investment in Developing Countries: An Empirical Analysis," IMF Staff Papers, Palgrave Macmillan, vol. 38(1), pages 33-58, March.
  6. Dickey, David A & Fuller, Wayne A, 1981. "Likelihood Ratio Statistics for Autoregressive Time Series with a Unit Root," Econometrica, Econometric Society, Econometric Society, vol. 49(4), pages 1057-72, June.
  7. Imtiaz Ahmed & Abdul Qayyum, 2007. "Do Public Expenditure and Macroeconomic Uncertainty Matter to Private Investment? Evidence from Pakistan," The Pakistan Development Review, Pakistan Institute of Development Economics, Pakistan Institute of Development Economics, vol. 46(2), pages 145-161.
  8. Hermes, Niels & Lensink, Robert, 2001. "Fiscal Policy and Private Investment in Less Developed Countries," Working Paper Series, World Institute for Development Economic Research (UNU-WIDER) UNU-WIDER Research Paper , World Institute for Development Economic Research (UNU-WIDER).
  9. Dhaneshwar Ghura & Barry Goodwin, 2000. "Determinants of private investment: a cross-regional empirical investigation," Applied Economics, Taylor & Francis Journals, Taylor & Francis Journals, vol. 32(14), pages 1819-1829.
  10. Pereira, Alfred M. & Roca-Sagales, Oriol, 2001. "Infrastructures and private sector performance in Spain," Journal of Policy Modeling, Elsevier, Elsevier, vol. 23(4), pages 371-384, May.
  11. Looney, Robert E., 1997. "Infrastructure and private sector investment in Pakistan," Journal of Asian Economics, Elsevier, Elsevier, vol. 8(3), pages 393-420.
  12. Johansen, Soren & Juselius, Katarina, 1990. "Maximum Likelihood Estimation and Inference on Cointegration--With Applications to the Demand for Money," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 52(2), pages 169-210, May.
  13. Shafik, Nemat & Shafik, Nemat, 1992. "Modeling private investment in Egypt," Journal of Development Economics, Elsevier, Elsevier, vol. 39(2), pages 263-277, October.
  14. Mehdi S. Monadjemi, 1996. "Public Expenditure And Private Investment: A Study of Three OECD Countries," Studies in Economics, Department of Economics, University of Kent 9601, Department of Economics, University of Kent.
  15. Chhibber, Ajay & van Wijnbergen, Sweder, 1988. "Public policy and private investment in Turkey," Policy Research Working Paper Series 120, The World Bank.
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