IDEAS home Printed from https://ideas.repec.org/a/eco/journ1/2021-04-6.html

Investment and Sustainable Economic Growth: Empirical Perspective on Kuwait s Dual Challenge During the COVID-19 Pandemic and Beyond

Author

Listed:
  • Faten Al-Jabsheh

    (Techno-Economics Division, Kuwait Institute for Scientific Research, Safat 13109, Kuwait)

  • Sulayman Al-Qudsi

    (Techno-Economics Division, Kuwait Institute for Scientific Research, Safat 13109, Kuwait)

  • Mohammed A. Hajeeh

    (Techno-Economics Division, Kuwait Institute for Scientific Research, Safat 13109, Kuwait)

Abstract

Endogenous economic growth theories have pointed to private investment as one of the determinants of long run, sustainable economic growth; a well-studied relationship in the development economics literature, both theoretically and empirically. One of the main reasons the Kuwaiti economy has not achieved its aspired degree of economic diversification over decades, is the relatively low level of private investment, which has eventuated in a relatively small private sector, partly due to an unimproved investment ecosystem. Like other economies, investment in Kuwait is a robust growth driver especially as a policy tool to achieve a digital, knowledge-based economy that leapfrogs on innovative technological investments, as ambitiously strategized by the Kuwait Vision 2035. The eruption of the coronavirus pandemic and the deep recession it triggered is likely to become a major hurdle in the way of spurring sufficient quality investments. With contracted GDP and collapsed oil prices, export and fiscal revenues shrink substantially, reducing investment activity and hence negatively affecting investment. This paper focuses on the role of private investment as a function of sustainable economic growth. Specifically, this paper aims to delineate the relationship between investment and economic growth in Kuwait by outlining; the determinants and impediments of investment, investment trends and behavior, innovative models of investment in Kuwait and applying a set of seven simulation-based scenarios of investment modelled as autoregressive distributed lags. By so doing, the paper elucidates the impact of critical variables including; non-oil GDP growth, interest rates management, attracting and fostering FDI inflows, as well as the recession plagued fiscal and trade balances, in order to estimate the magnitude and time-path of key policy variables on investment. The findings illustrate the rigidity of investment when recession drags GDP, FDI, exports and trade balances as well as fiscal revenues.

Suggested Citation

  • Faten Al-Jabsheh & Sulayman Al-Qudsi & Mohammed A. Hajeeh, 2021. "Investment and Sustainable Economic Growth: Empirical Perspective on Kuwait s Dual Challenge During the COVID-19 Pandemic and Beyond," International Journal of Economics and Financial Issues, Econjournals, vol. 11(4), pages 41-52.
    • Handle: RePEc:eco:journ1:2021-04-6
    as

    Download full text from publisher

    File URL: https://www.econjournals.com/index.php/ijefi/article/download/11513/pdf
    Download Restriction: no
    File URL: https://www.econjournals.com/index.php/ijefi/article/view/11513/pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Soren Jordan & Andrew Q. Philips, 2018. "Cointegration testing and dynamic simulations of autoregressive distributed lag modelsJournal: Stata Journal," Stata Journal, StataCorp LLC, vol. 18(4), pages 902-923, December.
    2. World Bank, 2018. "Doing Business 2018," World Bank Publications - Books, The World Bank Group, number 28608, April.
    3. Robert M. Solow, 1956. "A Contribution to the Theory of Economic Growth," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 70(1), pages 65-94.
    4. Bee Wah Tan & Chor Foon Tang, 2016. "Examining the Causal Linkages among Domestic Investment, FDI, Trade, Interest Rate and Economic Growth in ASEAN-5 Countries," International Journal of Economics and Financial Issues, Econjournals, vol. 6(1), pages 214-220.
    5. Nissar Fakraoui & Sayef Bakari, 2019. "Tie Among Domestic Investment, Exports And Economic Growth: Empirical Analysis From India," Journal of Smart Economic Growth, , vol. 4(1), pages 1-15, Mars.
    6. T. W. Swan, 1956. "ECONOMIC GROWTH and CAPITAL ACCUMULATION," The Economic Record, The Economic Society of Australia, vol. 32(2), pages 334-361, November.
    7. World Bank, 2010. "The World Bank Annual Report 2010," World Bank Publications - Books, The World Bank Group, number 5906, April.
    8. Nicolas Bloom & Stephen Bond & John Van Reenen, 2001. "The dynamics of investment under uncertainty," IFS Working Papers W01/05, Institute for Fiscal Studies.
    9. Robert J. Barro, 2013. "Inflation and Economic Growth," Annals of Economics and Finance, Society for AEF, vol. 14(1), pages 121-144, May.
    10. Loungani, Prakash & Rush, Mark, 1995. "The Effect of Changes in Reserve Requirements on Investment and GNP," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 27(2), pages 511-526, May.
    11. repec:bla:econom:v:70:y:2003:i:279:p:533-549 is not listed on IDEAS
    12. Chirinko, Robert S & Schaller, Huntley, 1995. "Why Does Liquidity Matter in Investment Equations?," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 27(2), pages 527-548, May.
    13. Magnus Blomström & Robert E. Lipsey & Mario Zejan, 1996. "Is Fixed Investment the Key to Economic Growth?," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 111(1), pages 269-276.
    14. Raymond Fisman, 2001. "Estimating the Value of Political Connections," American Economic Review, American Economic Association, vol. 91(4), pages 1095-1102, September.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Pablo Acosta & Andrés Loza, 2005. "Short and Long Run Determinants of Private Investment in Argentina," Journal of Applied Economics, Taylor & Francis Journals, vol. 8(2), pages 389-406, November.
    2. Miketa, Asami & Mulder, Peter, 2005. "Energy productivity across developed and developing countries in 10 manufacturing sectors: Patterns of growth and convergence," Energy Economics, Elsevier, vol. 27(3), pages 429-453, May.
    3. Jaewon Lim & Changkeun Lee & Euijune Kim, 2015. "Contributions of human capital investment policy to regional economic growth: an interregional CGE model approach," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 55(2), pages 269-287, December.
    4. Gary Madden & Scott J. Savage, 1998. "Sources of Australian Labour Productivity Change 1950–1994," The Economic Record, The Economic Society of Australia, vol. 74(227), pages 362-372, December.
    5. Bruno, Giuseppe & De Bonis, Riccardo & Silvestrini, Andrea, 2012. "Do financial systems converge? New evidence from financial assets in OECD countries," Journal of Comparative Economics, Elsevier, vol. 40(1), pages 141-155.
    6. Akhand Akhtar Hossain, 2009. "Central Banking and Monetary Policy in the Asia-Pacific," Books, Edward Elgar Publishing, number 12777, June.
    7. Mark V. JANIKAS & Sergio J. REY, 2008. "On The Relationships Between Spatial Clustering, Inequality, And Economic Growth In The United States : 1969-2000," Region et Developpement, Region et Developpement, LEAD, Universite du Sud - Toulon Var, vol. 27, pages 13-34.
    8. Alan V. Deardorff, 2011. "Rich And Poor Countries In Neoclassical Trade And Growth," World Scientific Book Chapters, in: Robert M Stern (ed.), Comparative Advantage, Growth, And The Gains From Trade And Globalization A Festschrift in Honor of Alan V Deardorff, chapter 25, pages 295-313, World Scientific Publishing Co. Pte. Ltd..
    9. Singh, Tarlok, 2010. "Does domestic saving cause economic growth? A time-series evidence from India," Journal of Policy Modeling, Elsevier, vol. 32(2), pages 231-253, March.
    10. Philippe Casin, 2003. "Une analyse structurelle de la σ-convergence. Application aux pays de la zone euro," Économie et Prévision, Programme National Persée, vol. 159(3), pages 39-52.
    11. Wei-Bin Zhang, 2017. "Growth with Endogenous Capital, Knowledge, and Renewable Resources," Romanian Statistical Review, Romanian Statistical Review, vol. 65(1), pages 19-37, March.
    12. Nicholas M. Odhiambo, 2022. "Does Foreign Direct Investment Spur Economic Growth? New Empirical Evidence From Sub-Saharan African Countries," Economic Annals, Faculty of Economics and Business, University of Belgrade, vol. 67(233), pages 61-84, April – J.
    13. Márcio Poletti Laurini, 2017. "A spatial error model with continuous random effects and an application to growth convergence," Journal of Geographical Systems, Springer, vol. 19(4), pages 371-398, October.
    14. Robert J. Barro, 1994. "Democracy & Growth," NBER Working Papers 4909, National Bureau of Economic Research, Inc.
    15. Asongu, Simplice & Andrés, Antonio R., 2015. "Trajectories in Knowledge Economy: Empirics from SSA and MENA countries," MPRA Paper 71786, University Library of Munich, Germany.
    16. Ghosh, Madhusudan & Ghoshray, Atanu & Malki, Issam, 2013. "Regional divergence and club convergence in India," Economic Modelling, Elsevier, vol. 30(C), pages 733-742.
    17. Kyle McNabb, 2016. "Tax structures and economic growth: New evidence from the Government Revenue Dataset," WIDER Working Paper Series 148, World Institute for Development Economic Research (UNU-WIDER).
    18. Ledyaeva, Svetlana & Linden, Mikael, 2006. "Foreign direct investment and economic growth : empirical evidence from Russian regions," BOFIT Discussion Papers 17/2006, Bank of Finland, Institute for Economies in Transition.
    19. Yaya Keho, 2011. "Long‐Run Determinants Of Savings Rates In Waemu Countries: An Empirical Assessment From Ardl Bounds Testing Approach," South African Journal of Economics, Economic Society of South Africa, vol. 79(3), pages 312-329, September.
    20. Brecard, Dorothee & Fougeyrollas, Arnaud & Le Mouel, Pierre & Lemiale, Lionel & Zagame, Paul, 2006. "Macro-economic consequences of European research policy: Prospects of the Nemesis model in the year 2030," Research Policy, Elsevier, vol. 35(7), pages 910-924, September.

    More about this item

    Keywords

    ;
    ;
    ;
    ;
    ;
    ;

    JEL classification:

    • C1 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General
    • C15 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Statistical Simulation Methods: General
    • F - International Economics
    • F01 - International Economics - - General - - - Global Outlook

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eco:journ1:2021-04-6. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Ilhan Ozturk (email available below). General contact details of provider: http://www.econjournals.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.