Determinants of Private Investment: Time Series Evidence from Bangladesh

A. F. M. Kamrul Hassan and Ruhul Salim

Journal of Developing Areas, 2011, vol. 45, issue 1, 229-249

Abstract: This article examines the determinants of private investment in Bangladesh using the standard time series econometric analysis. The empirical results partially support the flexible accelerator hypothesis. It is partial in the sense that real interest rate is not statistically significant in determining private investment whereas national output is very much effective in the long run. Further, government expenditure is found to be a significant determinant of private investment, both in the long- and short run. Government expenditures crowd out private investment, however, the effect is minimal as the investment is not interest responsive. Thus, government expenditure can be used effectively to lift output in case of recession while monetary policy is not so effective in recession because reducing the interest rate investment cannot be increased.

Keywords: Private investment; Time series; Government expenditure; Interest rate (search for similar items in EconPapers)
JEL-codes: C22 E20 E22 E60 (search for similar items in EconPapers)
Date: 2011
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Citations: View citations in EconPapers (7)

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Persistent link: https://EconPapers.repec.org/RePEc:jda:journl:vol.45:year:2011:issue1:pp:229-249

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