Is crude oil price detrimental to domestic private investment for an emerging economy? The role of public sector investment and financial sector development in an era of globalization

Hrushikesh Mallick (), Mantu Mahalik () and Manoranjan Sahoo ()

Energy Economics, 2018, vol. 69, issue C, 307-324

Abstract: Using annual data for the period 1980-2014, this study attempts to examine the impact of the international price of crude oil on private investment in India by endogenizing public sector investment, real interest rate, financial sector development, economic growth and economic globalization as other additional key determinants in a private investment model. This framework also serves as additional objective of verifying whether public sector investment crowds out or crowds in private investment in India and whether real interest rate as a monetary policy channel variable is effective in influencing the private investment. From our empirical estimation, we observed that crude oil price, public investment, and real interest rate have detrimental effects on the growth of domestic private investment, whereas financial sector development, economic growth, and globalization help to boost up private investment. From a policy perspective, the study suggests that India should intensively shift its focus towards both the production and consumption of renewable energies and tap other alternative potential sources of energy in order to offset the risks arising on account of India's heavy reliance on imports of crude oil from other oil exporting countries. This study further urges that the role of international crude oil price, public sector investment, and real interest rate can't be under-emphasized while designing a comprehensive growth-oriented energy policy strategy for India in order to achieve a sustainable economic development of the economy.

Keywords: Oil price; Private investment; Public investment; Interest rate; Bayer-Hanck cointegration; DOLS (search for similar items in EconPapers)
JEL-codes: E22 F4 O10 Q31 Q32 Q43 (search for similar items in EconPapers)
Date: 2018
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (17)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0140988317304280
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:eneeco:v:69:y:2018:i:c:p:307-324

DOI: 10.1016/j.eneco.2017.12.008

Access Statistics for this article

Energy Economics is currently edited by R. S. J. Tol, Beng Ang, Lance Bachmeier, Perry Sadorsky, Ugur Soytas and J. P. Weyant

More articles in Energy Economics from Elsevier
Bibliographic data for series maintained by Catherine Liu ().