Can Macroeconomic Policy Stimulate Private Investment in South Africa? New Insights from Aggregate and Manufacturing Sector-Level Evidence

Léonce Ndikumana

Working Papers from Political Economy Research Institute, University of Massachusetts at Amherst

Abstract: 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.

Keywords: South Africa; private investment; public investment; monetary policy; fiscal policy (search for similar items in EconPapers)
JEL-codes: E22 E52 E62 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-afr and nep-dev
Date: 2005
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Persistent link: http://EconPapers.repec.org/RePEc:uma:periwp:wp106

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