Empirical investment equations in developing countries
Since the debt crisis, there has been increasing interest in the determinants of investment in developing countries. There is plentiful literature on the topic for industrial economies but existing studies on developing countries are scattered and few. The author examined those studies with the aim of answering two questions: Are the variables that influence investment decisions the same in developing as in industrial countries, or should other factors be considered because the macroeconomic setting is different? And what can be learned from the applied research that has been done on the subject? This paper presents an integrative analytical framework, including different empirical equations, that depend on the assumptions made about the economies'key features. It classifies 25 empirical studies on investments in developing countries, classifying them according to their chosen specification and comparing their estimates. The author concludes that investment decisions in developing countries are not necessarily based on the same variables as in industrial countries. Analysts must consider such additional factors as financial repression, shortage of foreign exchange, lack of infrastructure, and significant economic instability.
|Date of creation:||31 Dec 1990|
|Contact details of provider:|| Postal: 1818 H Street, N.W., Washington, DC 20433|
Phone: (202) 477-1234
Web page: http://www.worldbank.org/
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Olivier J. Blanchard & Jeffrey Sachs, 1982. "Anticipations, Recessions and Policy: An Intertemporal Disequilibrium Model," NBER Working Papers 0971, National Bureau of Economic Research, Inc.
- Chow, Gregory C, 1985. "A Model of Chinese National Income Determination," Journal of Political Economy, University of Chicago Press, vol. 93(4), pages 782-792, August.
- Jaime de Melo & James Tybout, 2015.
"The Effects of Financial Liberalization on Savings and Investment in Uruguay,"
World Scientific Book Chapters,
in: Developing Countries in the World Economy, chapter 3, pages 55-81
World Scientific Publishing Co. Pte. Ltd..
- de Melo, Jaime & Tybout, James, 1986. "The Effects of Financial Liberalization on Savings and Investment in Uruguay," Economic Development and Cultural Change, University of Chicago Press, vol. 34(3), pages 561-587, April.
- Bertola, Giuseppe, 1998. "Irreversible investment," Research in Economics, Elsevier, vol. 52(1), pages 3-37, March.
- Olivier Jean Blanchard, 1988.
"Unemployment: Getting the Questions Right--and Some of the Answers,"
502, Massachusetts Institute of Technology (MIT), Department of Economics.
- Olivier Jean Blanchard, 1988. "Unemployment: Getting the Questions Right - and some of the answers," NBER Working Papers 2698, National Bureau of Economic Research, Inc.
- Dixit, Avinash K & Stiglitz, Joseph E, 1975.
"Monopolistic Competition and Optimum Product Diversity,"
The Warwick Economics Research Paper Series (TWERPS)
64, University of Warwick, Department of Economics.
- Dixit, Avinash K & Stiglitz, Joseph E, 1977. "Monopolistic Competition and Optimum Product Diversity," American Economic Review, American Economic Association, vol. 67(3), pages 297-308, June.
- van Wijnbergen, S., 1982. "Stagflationary effects of monetary stabilization policies : A quantitative analysis of South Korea," Journal of Development Economics, Elsevier, vol. 10(2), pages 133-169, April.
- Malkiel, Burton G & von Furstenberg, George M & Watson, Harry S, 1979. "Expectations, Tobin's q, and Industry Investment," Journal of Finance, American Finance Association, vol. 34(2), pages 549-561, May.
- George M. Von Furstenberg, 1977. "Corporate Investment: Does Market Valuation Matter in the Aggregate?," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 8(2), pages 347-408.
- Mario I. Blejer & Mohsin S. Khan, 1984. "Government Policy and Private Investment in Developing Countries (Politique des pouvoirs publics et investissement privÃ© dans les pays en dÃ©veloppement) (PolÃtica estatal e inversiÃ³n privada en lo," IMF Staff Papers, Palgrave Macmillan, vol. 31(2), pages 379-403, June.
- Fry, Maxwell J., 1980. "Saving, investment, growth and the cost of financial repression," World Development, Elsevier, vol. 8(4), pages 317-327, April.
- Lim, David, 1987. "Export Instability, Investment and Economic Growth in Developing Countries," Australian Economic Papers, Wiley Blackwell, vol. 26(49), pages 318-327, December.
- V. Sundararajan & Subhash Thakur, 1980. "Public Investment, Crowding out, and Growth: A Dynamic Model Applied to India and Korea (Investissement public, "effet de refoulement" et croissance: un modÃ¨le dynamique appliquÃ© Ã l'Inde ," IMF Staff Papers, Palgrave Macmillan, vol. 27(4), pages 814-855, December.
- Sneessens, Henri R., 1987. "Investment and the inflation-unemployment tradeoff in a macroeconomic rationing model with monopolistic competition," European Economic Review, Elsevier, vol. 31(3), pages 781-808, April.
- LICANDRO Omar, 1990. "Uncertainty and Tobinâ€™s Q in a Monopolistic Competition Framework," Discussion Papers (IRES - Institut de Recherches Economiques et Sociales) 1990003, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).
- Bilsborrow, Richard E, 1977. "The Determinants of Fixed Investment by Manufacturing Firms in a Developing Country," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 18(3), pages 697-717, October.
- Grossman, Herschel I, 1972. "A Choice-Theoretic Model of an Income-Investment Accelerator," American Economic Review, American Economic Association, vol. 62(4), pages 630-641, September.
- Gardner, Roy & Sheldon, Russell, 1975. "Financial Conditions and the Time Path of Equipment Expenditures," The Review of Economics and Statistics, MIT Press, vol. 57(2), pages 164-170, May.
- Hayashi, Fumio, 1982.
"Tobin's Marginal q and Average q: A Neoclassical Interpretation,"
Econometric Society, vol. 50(1), pages 213-224, January.
- Fumio Hayashi, 1981. "Tobin's Marginal q and Average a : A Neoclassical Interpretation," Discussion Papers 457, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
- Schiantarelli, F. & Georgoutsos, D., 1990. "Monopolistic competition and the Q theory of investment," European Economic Review, Elsevier, vol. 34(5), pages 1061-1078, July.
- Heller, Peter S, 1975. "A Model of Public Fiscal Behavior in Developing Countries: Aid, Investment, and Taxation," American Economic Review, American Economic Association, vol. 65(3), pages 429-445, June.
- Schramm, Richard, 1972. "Neoclassical Investment Models and French Private Manufacturing Investment," American Economic Review, American Economic Association, vol. 62(4), pages 553-563, September.
- Dailami, Mansoor & Walton, Michael, 1989. "Private investment, government policy, and foreign capital in Zimbabwe," Policy Research Working Paper Series 248, The World Bank.
- Abel, Andrew B., 1980. "Empirical investment equations : An integrative framework," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 12(1), pages 39-91, January.
- Behrman, Jere R, 1972. "Sectoral Investment Determination in a Developing Economy," American Economic Review, American Economic Association, vol. 62(5), pages 825-841, December.
When requesting a correction, please mention this item's handle: RePEc:wbk:wbrwps:563. 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: (Roula I. Yazigi)
If references are entirely missing, you can add them using this form.