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Selected Macroeconomic Variables Affecting Private Investment in Malawi

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  • Assa, Maganga
  • Abdi, Edriss K.

Abstract

This study provides an empirical test of the macroeconomic variables that can potentially affect private investment decisions in Malawi in a short and long run perspective using time series data. Both the theory and the empirical literature are reviewed in order to identify a private investment function for the last three decades (1979-2009). The results reveal that investment decisions seem to be determined by public investment, bank credit to the private sector and the real interest rate in the short run. Besides, there is evidence of a crowding-out effect of public investment. In the long run, the capital accumulation path seems to be closely dependent on both GDP growth and real exchange rates.

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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 40698.

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Date of creation: 19 Mar 2012
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Handle: RePEc:pra:mprapa:40698

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Keywords: Co-integration; Crowding-out; Error Correction Model; Malawi; Private investment;

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  1. Engle, Robert F & Granger, Clive W J, 1987. "Co-integration and Error Correction: Representation, Estimation, and Testing," Econometrica, Econometric Society, Econometric Society, vol. 55(2), pages 251-76, March.
  2. Oshikoya, Temitope W, 1994. "Macroeconomic Determinants of Domestic Private Investment in Africa: An Empirical Analysis," Economic Development and Cultural Change, University of Chicago Press, University of Chicago Press, vol. 42(3), pages 573-96, April.
  3. Christian H. Beddies, 1999. "Investment, Capital Accumulation, and Growth," IMF Working Papers 99/117, International Monetary Fund.
  4. Pablo Acosta & Andrés Loza, 2005. "Short and long run determinants of private investment in Argentina," Journal of Applied Economics, Universidad del CEMA, vol. 0, pages 389-406, November.
  5. Maxwell Fry, 1998. "Savings, Investment, Growth and Financial Distortions in Pacific Asia and Other Developing Areas," International Economic Journal, Taylor & Francis Journals, Taylor & Francis Journals, vol. 12(1), pages 1-24.
  6. Dhaneshwar Ghura, 1997. "Private Investment and Endogenous Growth," IMF Working Papers 97/165, International Monetary Fund.
  7. Ndikumana, Leonce, 2000. "Financial Determinants of Domestic Investment in Sub-Saharan Africa: Evidence from Panel Data," World Development, Elsevier, Elsevier, vol. 28(2), pages 381-400, February.
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