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Public and private investment and economic growth in Zimbabwe: An empirical test

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  • Makuyana, Garikai
  • Odhiambo, Nicholas Mbaya

Abstract

This study performs an examination on the impact of public and private investment on economic growth in Zimbabwe from 1970 to 2014. In addition to estimating the economic growth model, the study also estimates the crowding effect of public investment on private investment. The study utilised the newly developed ARDL-bounds testing approach with better small sample properties than the traditional cointegration techniques. The results show that while public investment has higher short-run impact on economic growth than private investment, in the long run, private investment contributed more to economic growth than public investment. In addition, the results reported the crowding-in effect on private investment of infrastructural public investment in the long run and gross public investment in the short run. Furthermore, the results found the crowding-out effect on private investment of gross public investment in the long run and non-infrastructural public investment in the short run. The results suggest that the short-run and long-run contribution to economic growth of private investment in Zimbabwe can be improved by cutting back on non-infrastructural public investment to necessary minimum level while stimulating the growth in infrastructural public investment.

Suggested Citation

  • Makuyana, Garikai & Odhiambo, Nicholas Mbaya, 2016. "Public and private investment and economic growth in Zimbabwe: An empirical test," Working Papers 21378, University of South Africa, Department of Economics.
    • Handle: RePEc:uza:wpaper:21378
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    2. Mercy. T. Musakwa & N. M. Odhiambo, 2020. "Remittance Inflows and Poverty Dynamics in South Africa: An Empirical Investigation," SAGE Open, , vol. 10(4), pages 21582440209, December.
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    5. 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.
    6. Nyoni, Thabani, 2018. "What determines private investment in Burundi?," MPRA Paper 87614, University Library of Munich, Germany.
    7. 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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    More about this item

    Keywords

    Zimbabwe; Public and Private Investment; Crowding Effect; Economic Growth;
    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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