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Aggregate Investment in People’s Republic of China: Some Empirical Evidence

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  • XINHUA HE
  • DUO QIN

Abstract

Aggregate domestic investment in People’s Republic of China is empirically modeled using quarterly data for the period 1994-2001. The total investment is disaggregated into two parts: business sector investment and government direct investment. The dynamic specification approach is adopted and the equilibrium-correction model form is used. Business sector investment is found to follow closely the standard capital input demand theory in the long run, but to respond positively to changes in government direct investment in the short run. It is found that government investment is driven, additionally to the revenue constraint, by the policy targets of maintaining steady economic growth and reducing unemployment. The resulting investment equations provide a sound model base for policy simulation and forecasting.

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  • Xinhua He & Duo Qin, 2004. "Aggregate Investment in People’s Republic of China: Some Empirical Evidence," Asian Development Review (ADR), World Scientific Publishing Co. Pte. Ltd., vol. 21(01), pages 99-117.
    • Handle: RePEc:wsi:adrxxx:v:21:y:2004:i:01:n:s0116110504000041
    DOI: 10.1142/S0116110504000041
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    Cited by:

    1. Qin, Duo & Cagas, Marie Anne & Ducanes, Geoffrey & Magtibay-Ramos, Nedelyn & Quising , Pilipinas & He, Xinhua & Liu, Rui & Liu, Shiguo, 2006. "A Small Macroeconometric Model of the People's Republic of China," ADB Economics Working Paper Series 81, Asian Development Bank.

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