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Determinants of Private Investment in Pakistan

Muhammad Suleman, Abdur Rehman and Haroon Javaid

Journal of Economic Impact, 2020, vol. 2, issue 3, 86-92

Abstract: Private investment has a significant relation with the economic growth of the country. It plays an important role in reduction of unemployment and poverty by promoting efficiency and competition among the firms. This study is an attempt to investigate the determinants of private investment in Pakistan. For this purpose, time-series data is utilized for the period 1974-2013. The ARDL (Auto Regressive-Distributed Lag) modeling technique of co-integration was employed to estimate the short-run and long-run determinants of private investment in Pakistan. Empirical findings of this study indicated that in the short-run private investment in Pakistan is determined by the growth rate of GDP, public sector investment, and domestic savings. While in the long run it is determined by the official exchange rate, the growth rate of GDP, public sector investment, domestic savings, trade openness, and interest rate. The results also revealed that in the case of Pakistan different political regimes (democratic, non-democratic) have no significance in the determination of private investment. Stability tests of CUSUM and (CUSUMSQ) (Cumulative Sum Control Chart) were performed in this study. These tests indicated a stable, long run as well as short-run structural stability of the model.

Keywords: Determinants; Profitability; Private investment; Time-series data; Pakistan. (search for similar items in EconPapers)
JEL-codes: E2 E22 (search for similar items in EconPapers)
Date: 2020
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Handle: RePEc:adx:journl:v:2:y:2020:i:3:p:86-92