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Public and private investment and economic growth in Zambia: A dynamic approach

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  • Makuyana, Garikai
  • Odhiambo, Nicholas Mbaya

Abstract

This paper investigates the dynamic contributions of public and private investment to economic growth in Zambia during the period from 1970 to 2014. In the analysis, the paper also estimated the important indirect contribution of public investment to economic growth through its crowding effect on private investment. The study employs the newly proposed Autoregressive Distributed Lag (ARDL)-bounds testing approach in estimating the economic growth and private investment models. The empirical evidence from the study shows that private investment contributes more to economic growth than public investment in Zambia in the short run and the long run. In addition, gross public investment, infrastructural and non-infrastructural public investment were found to crowd out private investment in the short run; while non-infrastructural public investment also had a crowding out effect on private investment in the long run. The results imply that the long-run contributions of both private and public investment to economic growth in Zambia can be improved by raising the infrastructural public investment to a threshold level that stimulates private investment growth while reducing non-infrastructural public investment to the basic minimum level.

Suggested Citation

  • Makuyana, Garikai & Odhiambo, Nicholas Mbaya, 2016. "Public and private investment and economic growth in Zambia: A dynamic approach," Working Papers 21377, University of South Africa, Department of Economics.
    • Handle: RePEc:uza:wpaper:21377
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    Cited by:

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    2. Hughes Hallett, Andrew & Hougaard Jensen, Svend E. & Sveinsson, Thorsteinn Sigurdur & Vieira, Filipe, 2019. "Sustainable fiscal strategies under changing demographics," European Journal of Political Economy, Elsevier, vol. 57(C), pages 34-52.
    3. Nyoni, Thabani, 2018. "What determines private investment in Burundi?," MPRA Paper 87614, University Library of Munich, Germany.
    4. Gerda Dewit & Dermot Leahy, 2018. "Attracting Foreign Direct Investment in Infrastructure," Economics Department Working Paper Series n290-18.pdf, Department of Economics, National University of Ireland - Maynooth.
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    6. Wahidin, Deni & Akimov, Alexandr & Roca, Eduardo, 2021. "The impact of bond market development on economic growth before and after the global financial crisis: Evidence from developed and developing countries," International Review of Financial Analysis, Elsevier, vol. 77(C).
    7. Sofia São Marcos & Sofia Vale, 2024. "Is there a nonlinear relationship between public investment and private investment? Evidence from 21 Organization for Economic Cooperation and Development countries," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 29(1), pages 887-902, January.
    8. Strike Mbulawa, 2021. "Trade and Investment Led Growth in Southern African Development Community (SADC)," Eurasian Journal of Economics and Finance, Eurasian Publications, vol. 9(2), pages 79-88.
    9. Saungweme, Talknice & Odhiambo, Nicholas M, 2019. "Relative impact of domestic and foreign public debt on economic growth in South Africa," Working Papers 25664, University of South Africa, Department of Economics.
    10. Victor Yotzov, 2020. "Foreign Direct Investments and Economic Growth in Bulgaria: Theoretical Challenges and Empirical Results," Economic Studies journal, Bulgarian Academy of Sciences - Economic Research Institute, issue 4, pages 3-27.
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    More about this item

    Keywords

    Zambia; Public Investment; Private Investment; Economic Growth; Crowding in effect; Crowding out effect; ARDL-bounds testing approach;
    All these keywords.

    JEL classification:

    • E22 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Investment; Capital; Intangible Capital; Capacity
    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence
    • P12 - Political Economy and Comparative Economic Systems - - Capitalist Economies - - - Capitalist Enterprises

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