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Domestic Investment and the Cost of Capital in the Caribbean

  • Shaun K. Roache


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    Investment rates across the Caribbean tend to be high and have been rising, reflecting increased public investment and FDI. Domestic investors have been less prominent. This may be one reason why such high investment has delivered Caribbean growth rates below the middle-income average. This paper seeks to understand how higher private investment may be encouraged. Using new data, it concludes public investment and FDI multipliers on private domestic investment (PDI) are weak. Also, PDI is sensitive to the cost of capital; policies designed to raise PDI should focus on reducing these costs rather than the multiplier effects of public spending.

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    Article provided by Euro-American Association of Economic Development in its journal Applied Econometrics and International Development.

    Volume (Year): 6 (2006)
    Issue (Month): 3 ()

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    Handle: RePEc:eaa:aeinde:v:6:y:2006:i:3_9
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