IDEAS home Printed from https://ideas.repec.org/a/bcp/journl/v5y2021i11p439-448.html
   My bibliography  Save this article

Crowding-Out and Crowding-In Effects of Public Borrowing on Private Domestic Investment in Nigeria

Author

Listed:
  • Mathias A. Chuba

    (Department of Economics, Achievers University Owo, Km 1, Idasen-Ute Road, P. M. B. 1030, Ondo State, Nigeria)

Abstract

Monetarists believe that public domestic borrowing crowds-out private domestic investment (PDI) and Keynesians believe that it does not crowd-out PDI. Most previous studies focused on the crowding-out effect of public spending on PDI but the point of contention between monetarists and Keynesians is the effect of increased public domestic borrowing on PDI. The results of the previous investigation that public domestic borrowing crowded-in and public external borrowing crowded-out private domestic investment in Nigeria are questionable. In view of the above stated problems, this paper determined the effect of public borrowing on PDI in Nigeria from 1986 to 2019 using a vector error correction model. The results of the investigation showed that public domestic borrowing drove-up interest rate. PDI was found to be negatively related to interest rate. Domestic credit provided by banks is positively related to interest rate. Public domestic borrowing crowded-out and public external borrowing crowded-in PDI. This paper suggests that instead of borrowing money from internal sources, the government should borrow money from external sources to finance the federal budget deficits in order to increase PDI in Nigeria.

Suggested Citation

  • Mathias A. Chuba, 2021. "Crowding-Out and Crowding-In Effects of Public Borrowing on Private Domestic Investment in Nigeria," International Journal of Research and Innovation in Social Science, International Journal of Research and Innovation in Social Science (IJRISS), vol. 5(11), pages 439-448, November.
    • Handle: RePEc:bcp:journl:v:5:y:2021:i:11:p:439-448
    as

    Download full text from publisher

    File URL: https://www.rsisinternational.org/journals/ijriss/Digital-Library/volume-5-issue-11/439-448.pdf
    Download Restriction: no
    File URL: https://www.rsisinternational.org/virtual-library/papers/crowding-out-and-crowding-in-effects-of-public-borrowing-on-private-domestic-investment-in-nigeria/
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Xiaoming Xu & Yanyang Yan, 2014. "Does government investment crowd out private investment in China?," Journal of Economic Policy Reform, Taylor and Francis Journals, vol. 17(1), pages 1-12, January.
    2. Bahal, Girish & Raissi, Mehdi & Tulin, Volodymyr, 2018. "Crowding-out or crowding-in? Public and private investment in India," World Development, Elsevier, vol. 109(C), pages 323-333.
    3. Erdal Atukeren, 2005. "Interactions Between Public and Private Investment: Evidence from Developing Countries," Kyklos, Wiley Blackwell, vol. 58(3), pages 307-330, July.
    4. António Afonso & Ricardo Sousa, 2011. "The macroeconomic effects of fiscal policy in Portugal: a Bayesian SVAR analysis," Portuguese Economic Journal, Springer;Instituto Superior de Economia e Gestao, vol. 10(1), pages 61-82, April.
    5. Stefan Mittnik & Thorsten Neumann, 2001. "Dynamic effects of public investment: Vector autoregressive evidence from six industrialized countries," Empirical Economics, Springer, vol. 26(2), pages 429-446.
    6. Johansen, Soren, 1988. "Statistical analysis of cointegration vectors," Journal of Economic Dynamics and Control, Elsevier, vol. 12(2-3), pages 231-254.
    7. Pritha Mitra, 2006. "Has Government Investment Crowded Out Private Investment in India?," American Economic Review, American Economic Association, vol. 96(2), pages 337-341, May.
    8. Voss, Graham M., 2002. "Public and private investment in the United States and Canada," Economic Modelling, Elsevier, vol. 19(4), pages 641-664, August.
    9. Xiaoming Xu & Yanyang Yan, 2014. "Does government investment crowd out private investment in China?," Journal of Economic Policy Reform, Taylor & Francis Journals, vol. 17(1), pages 1-12, March.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Pierre GUEI, 2024. "Effect of Public Investment on Private Investment in Côte d’Ivoire: A Long-Term Analysis," International Journal of Research and Innovation in Social Science, International Journal of Research and Innovation in Social Science (IJRISS), vol. 8(7), pages 3402-3411, July.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Nusrat Akber & Megha Gupta & Kirtti Ranjan Paltasingh, 2020. "The Crowding-in/ out Debate in Investments in India: Fresh Evidence from NARDL Application," South Asian Journal of Macroeconomics and Public Finance, , vol. 9(2), pages 167-189, December.
    2. Mallick, Hrushikesh & Mahalik, Mantu Kumar & Sahoo, Manoranjan, 2018. "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," Energy Economics, Elsevier, vol. 69(C), pages 307-324.
    3. Ibrahim Ari & Muammer Koc, 2020. "Economic Growth, Public and Private Investment: A Comparative Study of China and the United States," Sustainability, MDPI, vol. 12(6), pages 1-19, March.
    4. Hüseyin Şen & Ayşe Kaya, 2014. "Crowding-Out or Crowding-In? Analyzing the Effects of Government Spending on Private Investment in Turkey," Panoeconomicus, Savez ekonomista Vojvodine, Novi Sad, Serbia, vol. 61(6), pages 617-630, December.
    5. Sofia São Marcos & Sofia Vale, 2024. "Is there a nonlinear relationship between public investment and private investment? Evidence from 21 Organization for Economic Cooperation and Development countries," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 29(1), pages 887-902, January.
    6. Sajad Ahmad Bhat & Javed Ahmad Bhat & Taufeeq Ajaz, 2020. "The Public–Private Investment Nexus In India: Evidence From A Policy Simulation Approach," Economic Annals, Faculty of Economics and Business, University of Belgrade, vol. 65(224), pages 101-128, January –.
    7. Cevik, Serhan, 2020. "You are suffocating me: Firm-level analysis of state-owned enterprises and private investment," Journal of Comparative Economics, Elsevier, vol. 48(2), pages 292-301.
    8. Ghassan, Hassan & Alhajhoj, Hassan, 2010. "الارتباط الحركي بين الاستثمار في مؤسسات القطاع الحكومي والاستثمار الخاص عبر نموذج التقهقر الذاتي البنيوي: حالة الاقتصاد السعودي [The Dynamic Relationship between the Investment in Public and Privat," MPRA Paper 54398, University Library of Munich, Germany.
    9. Ward Romp & Jakob De Haan, 2007. "Public Capital and Economic Growth: A Critical Survey," Perspektiven der Wirtschaftspolitik, Verein für Socialpolitik, vol. 8(S1), pages 6-52, April.
    10. Martin Gurtler, 2018. "What Influences Private Investment? The Case of the Czech Republic," Working Papers 2018/14, Czech National Bank.
    11. Iszan Hana Kaharudin & Mohammad Syuhaimi Ab-Rahman, 2022. "Fiscal Policy Effects on Private Expenditure for Sustainable Economic Growth: A Panel VAR Study from Selected Developing Countries," Sustainability, MDPI, vol. 14(17), pages 1-21, August.
    12. Abid, Mehdi & Alotaibi, Mohammed Naif, 2020. "Crude oil price and private sector of Saudi Arabia: Do globalization and financial development matter? New evidence from combined cointegration test," Resources Policy, Elsevier, vol. 69(C).
    13. Christophe Kamps, 2005. "The Dynamic Effects of Public Capital: VAR Evidence for 22 OECD Countries," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 12(4), pages 533-558, August.
    14. Ouédraogo, Rasmané & Sawadogo, Relwendé & Sawadogo, Hamidou, 2020. "Private and public investment in sub-Saharan Africa: The role of instability risks," Economic Systems, Elsevier, vol. 44(2).
    15. Tai Dang Nguyen, 2016. "Impact Of Government Spending On Inflation In Asian Emerging Economies: Evidence From India, China, And Indonesia," The Singapore Economic Review (SER), World Scientific Publishing Co. Pte. Ltd., vol. 64(05), pages 1171-1200, December.
    16. Federici, Andrea, 2018. "Il rapporto tra capitale pubblico e altre variabili macroeconomiche: un'applicazione empirica [The relationship between public capital and other macroeconomic variables: an empirical application]," MPRA Paper 88516, University Library of Munich, Germany.
    17. Alt, Marius & Berger, Marius & Bersch, Johannes, 2023. "Investor responses to information updates on peer behavior and public investment policy: The case of green investments," ZEW Discussion Papers 23-024, ZEW - Leibniz Centre for European Economic Research.
    18. Eslon Ngeendepi & Andrew Phiri, 2021. "Do FDI and Public Investment Crowd in/out Domestic Private Investment in the SADC Region?," Managing Global Transitions, University of Primorska, Faculty of Management Koper, vol. 19(1 (Spring), pages 3-25.
    19. Anirudha Barik & Asit Ranjan Mohanty, 2019. "New evidence on the relationship between public and private investment in India," Economics Bulletin, AccessEcon, vol. 39(3), pages 1989-2001.
    20. Ravindra H. Dholakia, 2020. "A Theory of Growth and Threshold Inflation with Estimates," Journal of Quantitative Economics, Springer;The Indian Econometric Society (TIES), vol. 18(3), pages 471-493, September.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bcp:journl:v:5:y:2021:i:11:p:439-448. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Dr. Pawan Verma (email available below). General contact details of provider: https://rsisinternational.org/journals/ijriss/ .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.