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A Note On Public Debt-Private Investment Nexus In Emerging Economies

Author

Listed:
  • Dinci J. Penzin

    (Central Bank of Nigeria & Nile University)

  • Afees Salisu

    (University of Pretoria)

  • Benedict N.Akanegbu

    (Nile Universit)

Abstract

We examine the effect of public debt on private investment in selected emerging economies. Using a panel threshold regression model, we estimate a threshold value of about 3 percent, on average, below which public debt stimulates private investment. Our additional analysis involving selected developed economies suggests that the crowding out effect is less evident relative to the emerging economies as higher public debt stocks do not seem to significantly undermine their private investments. These results have implications for debt sustainability and maintaining a reasonable public debt–GDP ratio is crucial for sustainable investment growth.

Suggested Citation

  • Dinci J. Penzin & Afees Salisu & Benedict N.Akanegbu, 2022. "A Note On Public Debt-Private Investment Nexus In Emerging Economies," Bulletin of Monetary Economics and Banking, Bank Indonesia, vol. 25(1), pages 25-36, June.
    • Handle: RePEc:idn:journl:v:25:y:2022:i:1b:p:25-36
    DOI: https://doi.org/10.21098/bemp.v25i1.1988
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    References listed on IDEAS

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    More about this item

    Keywords

    Debt; Investment; Nonlinearity; Threshold regression models;
    All these keywords.

    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • D25 - Microeconomics - - Production and Organizations - - - Intertemporal Firm Choice: Investment, Capacity, and Financing
    • H63 - Public Economics - - National Budget, Deficit, and Debt - - - Debt; Debt Management; Sovereign Debt

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