Private Investment in Developing Countries: An Empirical Analysis

International Monetary Fund

No 1990/040, IMF Working Papers from International Monetary Fund

Abstract: This paper analyzes the effects of several policy and other macro-economic variables on the ratio of private investment to GDP in developing countries. Using data for a sample of 23 developing countries over the period 1975-87, the econometric evidence indicates that the rate of private investment is positively related to the real growth rate of GDP, public sector investment, and to a lesser extent the level of per capita GDP, while it is negatively related to domestic inflation, the debt service ratio, the debt-to-GDP ratio, and high real interest rates. There is also some indication that all but the last of these variables had a greater impact before the onset of the debt crisis in 1982, while the debt-to-GDP ratio (a measure of a country’s debt overhang) has become more important since then.

Keywords: WP; investment rate; investment; rate; growth rate; debt service; rates in Singapore; longer-term investment project; GDP ratio; gross investment; rates in Korea; adverse investment climate; Private investment; Public investment spending; Real interest rates; Debt service ratios; Europe; Asia and Pacific (search for similar items in EconPapers)
Pages: 30
Date: 1990-01-01
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Citations: View citations in EconPapers (3)

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