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Do fiscal measures stimulate private investment in Africa?

Author

Listed:
  • Olatunji A. SHOBANDE

    (Department of Economics, Faculty of Social Sciences, University of Lagos, Akoka, Yaba, Lagos, Nigeria)

  • Chidi Ndubuisi OLUNKWA

    (Department of Economics, Faculty of Social Sciences, University of Lagos, Akoka, Yaba, Lagos, Nigeria)

Abstract

The study inspects the effect of fiscal measures on private investment in selected African countries between 1980–2016. The study adopts a Panel Autoregressive Distributed Lag (PARDL) bounds testing approach. The long-run estimates show that interest on debt payment, government expenditure, expected inflation, exchange rate, and government tax revenue all have positive relationships with private investment, suggesting fiscal measures crowd in private investment in the long run. However, in the short run, changes in the one-lagged variables have negative impacts, whereas two-lagged variables show positive impacts, indicating that fiscal measures may crowd out private investment in the short run. The paper recommends fiscal discipline for policymakers if private investment is to thrive in Africa.

Suggested Citation

  • Olatunji A. SHOBANDE & Chidi Ndubuisi OLUNKWA, 2018. "Do fiscal measures stimulate private investment in Africa?," Journal of Economics and Political Economy, EconSciences Journals, vol. 5(3), pages 343–352-3, September.
    • Handle: RePEc:cvv:journ1:v:5:y:2018:i:3:p:343-352
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    References listed on IDEAS

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    4. Mahmoud Mahmoudzadeh & Somaye Sadeghi & Soraya Sadeghi, 2013. "Fiscal Spending and Crowding out Effect: A Comparison between Developed and Developing Countries," Institutions and Economies (formerly known as International Journal of Institutions and Economies), Faculty of Economics and Administration, University of Malaya, vol. 5(1), pages 31-40, April.
    5. Ghulam Rasool Madni, 2014. "Taxation, Fiscal Deficit and Inflation in Pakistan," Romanian Economic Journal, Department of International Business and Economics from the Academy of Economic Studies Bucharest, vol. 17(53), pages 41-60, September.
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    Keywords

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    JEL classification:

    • H30 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - General
    • E20 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - General (includes Measurement and Data)
    • E65 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Studies of Particular Policy Episodes

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