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The Impact of Sectoral Investment on Economic Growth: Evidence from Algeria using Static Panel Data Models

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  • Kamel Mahali

    (Ferhat Abbas University Setif , Faculty of Economics and management, Department of Economics, Setif, Algeria.)

Abstract

This study aims to measure the impact of sectoral investment on economic growth in Algeria through an econometric model including a panel of eight key sectors over a 25-year period from 1996 to 2020. The study uses static panel data models based on several economic variables, where the dependent variable is Gross Domestic Product (GDP) and the independent variables are Gross Fixed Capital Formation (GFCF) and Compensation of Employees (COE). The results indicate that the fixed effects model is the appropriate model; i.e., the investment in the different sectors does not have the same impact on economic growth in Algeria. After examining the validity of the fixed effects model, it was found that it suffers from cross-sectional dependence, autocorrelation, and heteroscedasticity of errors. This complication was eliminated by using fixed effects regression models with robust Driscoll and Kraay standard errors.

Suggested Citation

  • Kamel Mahali, 2024. "The Impact of Sectoral Investment on Economic Growth: Evidence from Algeria using Static Panel Data Models," Istanbul Journal of Economics-Istanbul Iktisat Dergisi, Istanbul Journal of Economics-Istanbul Iktisat Dergisi, vol. 0(40), pages 12-21, June.
    • Handle: RePEc:ijs:journl:v:0:y:2024:i:40:p:12-21
    DOI: 10.26650/ekoist.2024.40.1249645
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    References listed on IDEAS

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    1. Daniel Hoechle, 2007. "Robust standard errors for panel regressions with cross-sectional dependence," Stata Journal, StataCorp LP, vol. 7(3), pages 281-312, September.
    2. Pesaran, M. Hashem, 2015. "Time Series and Panel Data Econometrics," OUP Catalogue, Oxford University Press, number 9780198759980.
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