IDEAS home Printed from
   My bibliography  Save this article

Public-Private Investment and Economic Growth in Pakistan: An Empirical Analysis


  • Maryam Bint-e-Ajaz

    (University of AJ&K, Muzaffarabad)

  • Nazima Ellahi

    (Foundation University, Islamabad)


This study has attempted to evaluate the inter-relationship among the three macro-variables, namely public and private investment and GDP growth both in the long and short run with reference to Pakistan economy for the period of 1972–2011. We have tried to pinpoint the important determinants of each variable, using the standard econometric techniques. Long run relationship between the variables is specified by using method proposed by Johansen and Juselious (1990). Based on the results of the long-run co-integration parameters short run error correction model is used to estimate the short run relationship between the variables. As expected, the GDP growth has a strong positive relationship with public and private investment and there is a two-way causality between GDP and investment. The public investment is affected by the level of GDP, inflation and exchange rates. Likewise, private investment is affected by inflation and exchange rates, the lending rate, besides the level of GDP. The general negative theoretical relationship between public and private investment is confirmed in the context of Pakistan economy, i.e. public investment exerts a “crowding-out” effect on private investment at large. This is because public investment has primarily been financed in the past through internal and external borrowing. The government revenues collected through taxation has little contribution in promoting public investment.

Suggested Citation

  • Maryam Bint-e-Ajaz & Nazima Ellahi, 2012. "Public-Private Investment and Economic Growth in Pakistan: An Empirical Analysis," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 51(4), pages 61-78.
  • Handle: RePEc:pid:journl:v:51:y:2012:i:4:p:61-78

    Download full text from publisher

    File URL:
    Download Restriction: no


    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.

    Cited by:

    1. repec:asi:adprev:2018:p:20-31 is not listed on IDEAS

    More about this item


    Public Investment; Economic Growth;

    JEL classification:

    • E2 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment
    • O4 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity


    Access and download statistics


    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:pid:journl:v:51:y:2012:i:4:p:61-78. 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: (Khurram Iqbal). General contact details of provider: .

    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.

    We have no references for this item. You can help adding them by using 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.

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

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.