Private and Public Investment in Malaysia: Substitutability or Complementarity?
It is generally accepted that the government plays a major role in promoting and/or financing private capital formation. Policymakers and analysts believe that public investment provides a significant stimulus to private investment, and thus serves as an instrument in achieving a high economic growth rate. However, empirically, there is a lack of consensus on whether public investment plays a role as complement or substitute to private investment. Hence, the objective of this study is to ascertain this evidence in the case of Malaysia. Using the error correction model analysis, in the short-run, the results show that public investment does not affect private investment. However, public investment has a positive effect on private investment in the long-run indicating a complementary relationship between the two. This result indicates that, public and private investment complement each other. This might be the case where increase in public capital raises the marginal productivity of private capital, resulting in a greater use of private capital. The results support the Malaysian government policy of using government expenditures where most of the government expenditure is on infrastructure investment as a tool to increase aggregate demand since private investment respond positively to public investment in the long-run.
To our knowledge, this item is not available for
download. To find whether it is available, there are three
1. Check below under "Related research" whether another version of this item is available online.
2. Check on the provider's web page whether it is in fact available.
3. Perform a search for a similarly titled item that would be available.
Volume (Year): VI (2007)
Issue (Month): 2 (March)
|Contact details of provider:|| |
When requesting a correction, please mention this item's handle: RePEc:icf:icfjae:v:06:y:2007:i:2:p:17-32. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (G R K Murty)
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 references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link 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 profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.