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Economic liberalization and price response of aggregate private investment: time series evidence from India

Author

Listed:
  • M. Shahe Emran
  • Forhad Shilpi
  • M. Imam Alam

Abstract

This paper presents evidence on the effects of economic liberalization of 1991 on the price responsiveness of aggregate private investment in India. The wide ranging reforms are expected to increase the price response of private investment due to (i) the Le Chatelier effect, (ii) a higher price elasticity of demand for final goods, and (iii) possible relaxation of the credit constraint. The empirical results, based on alternative specifications, estimation methods, and sample periods, show a dramatic increase in the price response; the elasticity of investment with respect to the relative cost of capital has increased five times after the dismantling of the `Licence Raj.'

Suggested Citation

  • M. Shahe Emran & Forhad Shilpi & M. Imam Alam, 2007. "Economic liberalization and price response of aggregate private investment: time series evidence from India," Canadian Journal of Economics, Canadian Economics Association, vol. 40(3), pages 914-934, August.
    • Handle: RePEc:cje:issued:v:40:y:2007:i:3:p:914-934
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    Cited by:

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    9. Hassan, Hissam & Masih, Mansur, 2017. "Public debt and GDP growth in the Malaysian islamic economy," MPRA Paper 107999, University Library of Munich, Germany.
    10. Yemane Wolde-Rufael, 2009. "The Defence Spending-External Debt Nexus In Ethiopia," Defence and Peace Economics, Taylor & Francis Journals, vol. 20(5), pages 423-436, October.
    11. A., Rjumohan, 2019. "Stock Markets: An Overview and A Literature Review," MPRA Paper 101855, University Library of Munich, Germany.
    12. M. Shahe Emran & Forhad Shilpi, 2010. "Estimating an Import Demand Function in Developing Countries: A Structural Econometric Approach with Applications to India and Sri Lanka," Review of International Economics, Wiley Blackwell, vol. 18(2), pages 307-319, May.
    13. James B. Ang, 2010. "Determinants Of Private Investment In Malaysia: What Causes The Postcrisis Slumps?," Contemporary Economic Policy, Western Economic Association International, vol. 28(3), pages 378-391, July.
    14. James Ang, 2008. "Private Investment And Financial Sector Policies In Developing Countries," Monash Economics Working Papers 07/08, Monash University, Department of Economics.
    15. Wolde-Rufael, Yemane, 2010. "Bounds test approach to cointegration and causality between nuclear energy consumption and economic growth in India," Energy Policy, Elsevier, vol. 38(1), pages 52-58, January.
    16. Ang, James, 2009. "Financial Liberalization Or Repression?," MPRA Paper 14497, University Library of Munich, Germany.
    17. Onater-Isberk, Esra, 2016. "Environmental Kuznets curve under noncarbohydrate energy," Renewable and Sustainable Energy Reviews, Elsevier, vol. 64(C), pages 338-347.
    18. Joshua Sunday Riti & Deyong Song & Yang Shu & Miriam Kamah & Agya Adi Atabani, 2018. "Does renewable energy ensure environmental quality in favour of economic growth? Empirical evidence from China’s renewable development," Quality & Quantity: International Journal of Methodology, Springer, vol. 52(5), pages 2007-2030, September.
    19. Dilara Kilinc & Esra Onater & Hakan Yetkiner, 2015. "The ARDL Test of Gender Kuznets Curve for G7 Countries," The Journal of European Theoretical and Applied Studies, The Center for European Studies at Kirklareli University - Turkey, vol. 3(2), pages 37-56.
    20. Mohammad Sharik Essa & Evangelos Giouvris, 2023. "Fama–French–Carhart Factor-Based Premiums in the US REIT Market: A Risk Based Explanation, and the Impact of Financial Distress and Liquidity Crisis from 2001 to 2020," IJFS, MDPI, vol. 11(1), pages 1-39, January.

    More about this item

    JEL classification:

    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
    • E22 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Investment; Capital; Intangible Capital; Capacity

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