Do Public Expenditure and Macroeconomic Uncertainty Matter to Private Investment? Evidence from Pakistan

Imtiaz Ahmed and Abdul Qayyum ()
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Imtiaz Ahmed: Planning Commission of Pakistan

The Pakistan Development Review, 2007, vol. 46, issue 2, pages 145-161

Abstract: This study examines the role of macroeconomic uncertainty and public expenditure in determining private fixed investment in Pakistan. It is found that individual series are nonstationary. There is a long-run relationship between private fixed investment, public consumption expenditure, public development expenditure, and market activities. It is revealed that public development expenditure stimulates private investment, whereas public consumption expenditure is detrimental to private investment. The preferred dynamic private fixed investment function confirms that in the short run, public development expenditure enhances private investment. Moreover, macroeconomic instability and uncertainty depresses private investment in Pakistan.

Keywords: Private Investment; Public Expenditure; Macroeconomic Uncertainty; Co-integration; Pakistan (search for similar items in EconPapers)
JEL-codes: E22 (search for similar items in EconPapers)
Date: 2007
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