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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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  3. Léonce Ndikumana, 2003. "Financial Development, Financial Structure, and Domestic Investment: International Evidence," UMASS Amherst Economics Working Papers 2003-01, University of Massachusetts Amherst, Department of Economics.
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  12. 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.
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