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Can macroeconomic policy stimulate private investment in South Africa? New insights from aggregate and manufacturing sector-level evidence

  • Léonce Ndikumana

    ()

    (University of Massachusetts Amherst)

This study explores the determinants of investment using both aggregated industry-level data and disaggretated data on 27 sub-sectors of the manufacturing sector for the period 1970-2001. According to the results in this study, the government has potentially powerful means at its disposal to stimulate private investment. In particular, a domestic demand stimulus and public investment expansion will produce large gains in private investment. While the direct effects of lowering the interest rate appear to be quantitatively small, indirect effects operating notably through domestic demand and cheaper credit are likely to be large. The evidence in this study also indicates that it is important to minimize exchange rate instability to encourage investment. JEL Categories: E22; E52; E62

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Paper provided by University of Massachusetts Amherst, Department of Economics in its series UMASS Amherst Economics Working Papers with number 2005-14.

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Date of creation: Sep 2005
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Handle: RePEc:ums:papers:2005-14
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  1. David Fielding,, . "Manufacturing Investment in South Africa: A Time-Series Model," Discussion Papers 97/5, University of Nottingham, CREDIT.
  2. Reinikka, Ritva & Svensson, Jakob, 2002. "Coping with poor public capital," Journal of Development Economics, Elsevier, vol. 69(1), pages 51-69, October.
  3. Joshua Greene & Delano Villanueva, 1991. "Private Investment in Developing Countries: An Empirical Analysis," IMF Staff Papers, Palgrave Macmillan, vol. 38(1), pages 33-58, March.
  4. De Long, J Bradford & Summers, Lawrence H, 1991. "Equipment Investment and Economic Growth," The Quarterly Journal of Economics, MIT Press, vol. 106(2), pages 445-502, May.
  5. Lawrence Edwards & StephenS. Golub, 2003. "South African Productivity And Capital Accumulation In Manufacturing: An International Comparative Analysis," South African Journal of Economics, Economic Society of South Africa, vol. 71(4), pages 659-678, December.
  6. S.A. Du Plessis, 2002. "EVALUATING THE SARB's INFLATION TARGET," South African Journal of Economics, Economic Society of South Africa, vol. 70(6), pages 982-1007, 09.
  7. David Fielding,, . "Aggregate Investment in South Africa: A Model with Implications for Political Reform," Discussion Papers 96/13, University of Nottingham, CREDIT.
  8. Arellano, Manuel & Bond, Stephen, 1991. "Some Tests of Specification for Panel Data: Monte Carlo Evidence and an Application to Employment Equations," Review of Economic Studies, Wiley Blackwell, vol. 58(2), pages 277-97, April.
  9. du Plessis, S.A., 2006. "Reconsidering the business cycle and stabilisation policies in South Africa," Economic Modelling, Elsevier, vol. 23(5), pages 761-774, September.
  10. W.A. Naudéa & R. Oostendorp & P.A.E. Serumaga-Zake, 2002. "South African Manufacturing In An African Context," South African Journal of Economics, Economic Society of South Africa, vol. 70(8), pages 1247-1272, December.
  11. Vishnu Padayachee, 2001. "Central Bank transformation in a globalized world: the Reserve Bank in post-apartheid South Africa," Journal of International Development, John Wiley & Sons, Ltd., vol. 13(6), pages 741-765.
  12. Khan, Mohsin S. & Reinhart, Carmen M., 1990. "Private investment and economic growth in developing countries," World Development, Elsevier, vol. 18(1), pages 19-27, January.
  13. Jan Willem Gunning & Paul Collier, 1999. "Explaining African Economic Performance," Journal of Economic Literature, American Economic Association, vol. 37(1), pages 64-111, March.
  14. Ndikumana, Leonce, 2005. "Financial development, financial structure, and domestic investment: International evidence," Journal of International Money and Finance, Elsevier, vol. 24(4), pages 651-673, June.
  15. G.L. Wet & Estelle Jonkergouw & Renee Koekemoer, 1995. "An Econometric Model for Monetary Policy in South Africa," South African Journal of Economics, Economic Society of South Africa, vol. 63(4), pages 317-329, December.
  16. Janine Aron & Ibrahim Elbadawi & Brian Kahn, 1998. "Determinants of the real exchange rate in South Africa," CSAE Working Paper Series 1997-16, Centre for the Study of African Economies, University of Oxford.
  17. Ndikumana, Leonce, 2000. "Financial Determinants of Domestic Investment in Sub-Saharan Africa: Evidence from Panel Data," World Development, Elsevier, vol. 28(2), pages 381-400, February.
  18. Reinhart, Carmen & Khan, Mohsin, 1989. "Private investment and economic growth in developing countries," MPRA Paper 13655, University Library of Munich, Germany.
  19. Levine, Ross & Renelt, David, 1992. "A Sensitivity Analysis of Cross-Country Growth Regressions," American Economic Review, American Economic Association, vol. 82(4), pages 942-63, September.
  20. Devarajan, Shantayanan & Easterley, William R. & Pack, Howard, 2001. "Is investment in Africa too low or too high : macro and micro evidence," Policy Research Working Paper Series 2519, The World Bank.
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  22. Johannes Fedderke, 2004. "Investment in Fixed Capital Stock: Testing for the Impact of Sectoral and Systemic Uncertainty," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 66(2), pages 165-187, 05.
  23. Reinikka, Ritva & Svensson, Jakob, 1999. "How inadequate provision of public infrastructure and services affects private investment," Policy Research Working Paper Series 2262, The World Bank.
  24. repec:cup:cbooks:9780521831802 is not listed on IDEAS
  25. Edwards, Lawrence & Golub, Stephen S., 2004. "South Africa's International Cost Competitiveness and Exports in Manufacturing," World Development, Elsevier, vol. 32(8), pages 1323-1339, August.
  26. Mario I. Blejer & Mohsin S. Khan, 1984. "Government Policy and Private Investment in Developing Countries (Politique des pouvoirs publics et investissement privé dans les pays en développement) (Política estatal e inversión privada en lo," IMF Staff Papers, Palgrave Macmillan, vol. 31(2), pages 379-403, June.
  27. Mohsin S. Khan, 1996. "Government Investment and Economic Growth in the Developing World," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 35(4), pages 419-439.
  28. ., 2004. "W," Chapters, in: An Eponymous Dictionary of Economics, chapter 21 Edward Elgar.
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