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Does Fiscal Measures Stimulates Private Investment in Africa?

Author

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  • Olatunji Abdul SHOBANDE

    (Department of Economics, Faculty of Social Sciences, University of Lagos, Akoka, Yaba, Lagos, NigeriaAuthor-Name: Chidi Ndubuisi OLUNKWA)

  • Chidi Ndubuisi OLUNKWA

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

Abstract

The study focuses on the effect of fiscal measures on private investment in selected African countries between 1980-2016. The study adopts Panel Autoregressive Distributed Lag (PARDL) Bounds testing approach developed by Pesaran, Shin and Smith (2001) in estimating the relevant relationship. The results of the long run estimates show that the interest on debt payment, government expenditure, expected inflation, exchange rate and government tax revenue, all have a positive relation with private investment among five selected African countries, suggesting that fiscal measures have crowd in effects on private investment in the long run. While, the results on the short run dynamics show that change in the previous one lagged periods of the variables have negative impacts on private investment, whereas the lagged two of the variables shows positive impacts on private investment in the short run, suggesting that there is a crowd out fiscal measures crowd out private investment in among the five selected African countries. The study recommends that the policy makers need to ensure fiscal discipline, if private investment must survive in African.

Suggested Citation

  • Olatunji Abdul SHOBANDE & Chidi Ndubuisi OLUNKWA, 2020. "Does Fiscal Measures Stimulates Private Investment in Africa?," Romanian Journal of Economics, Institute of National Economy, vol. 51(2(60)), pages 36-49, December.
    • Handle: RePEc:ine:journl:v:51:y:2020:i:60:p:36-49
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    References listed on IDEAS

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    1. 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.
    2. M. Hashem Pesaran & Yongcheol Shin & Richard J. Smith, 2001. "Bounds testing approaches to the analysis of level relationships," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 16(3), pages 289-326.
    3. Kao, Chihwa, 1999. "Spurious regression and residual-based tests for cointegration in panel data," Journal of Econometrics, Elsevier, vol. 90(1), pages 1-44, May.
    4. Hermes, Niels & Lensink, Robert, 2001. "Capital flight and the uncertainty of government policies," Economics Letters, Elsevier, vol. 71(3), pages 377-381, June.
    5. Levin, Andrew & Lin, Chien-Fu & James Chu, Chia-Shang, 2002. "Unit root tests in panel data: asymptotic and finite-sample properties," Journal of Econometrics, Elsevier, vol. 108(1), pages 1-24, May.
    6. 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.
    7. Ghulam Rasool Madni, 2013. "Instrumental Effects of Fiscal Policy for Pakistan Economy," Romanian Economic Journal, Department of International Business and Economics from the Academy of Economic Studies Bucharest, vol. 16(50), pages 27-50, December.
    8. Olivier Blanchard & Roberto Perotti, 2002. "An Empirical Characterization of the Dynamic Effects of Changes in Government Spending and Taxes on Output," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 117(4), pages 1329-1368.
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    Cited by:

    1. Olatunji Abdul Shobande & Ndubuisi Chidi Olunkwa, 2019. "Doing Business in Nigeria: Does Offensive and Defensive Interest Matters," Academic Journal of Economic Studies, Faculty of Finance, Banking and Accountancy Bucharest,"Dimitrie Cantemir" Christian University Bucharest, vol. 5(1), pages 90-94, March.

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    More about this item

    Keywords

    Fiscal Measures; Private Investment; Africa; Exchange rate;
    All these keywords.

    JEL classification:

    • H3 - Public Economics - - Fiscal Policies and Behavior of Economic Agents
    • E2 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment
    • E65 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Studies of Particular Policy Episodes

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