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Determinants of Private Investment: Time Series Evidence from Bangladesh

Author

Listed:
  • A. F. M. Kamrul Hassan
  • Ruhul A. Salim

    (University of Rajshahi, Bangladesh
    Curtin University of Technology, Australia)

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.

Suggested Citation

  • A. F. M. Kamrul Hassan & Ruhul A. Salim, 2011. "Determinants of Private Investment: Time Series Evidence from Bangladesh," Journal of Developing Areas, Tennessee State University, College of Business, vol. 45(1), pages 229-249, July-Dece.
    • Handle: RePEc:jda:journl:vol.45:year:2011:issue1:pp:229-249
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    File URL: http://muse.jhu.edu/journals/journal_of_developing_areas/v045/45.hassan.html
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    Citations

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    Cited by:

    1. Micheal Kofi Boachie & Martin Ruzima & Mustapha Immurana, 2020. "The Concurrent Effect of Financial Development and Trade Openness on Private Investment in India," South Asian Journal of Macroeconomics and Public Finance, , vol. 9(2), pages 190-220, December.
    2. Olatunji Abdul Shobande & Oladimeji Tomiwa Shodipe, 2019. "Mechanics Of Investment Drivers In Chinese Economy," Review of Economic and Business Studies, Alexandru Ioan Cuza University, Faculty of Economics and Business Administration, issue 23, pages 7-32, June.
    3. Maame Esi Eshun & George Adu & Emmanuel Buabeng, 2014. "The Financial Determinants of Private Investment in Ghana," International Journal of Financial Economics, Research Academy of Social Sciences, vol. 3(1), pages 25-40.
    4. Thomas Galih Pramudita & Setyabudi Indartono & Maimun Sholeh, 2019. "The Antecedent of Domestic Investment in Indonesia: Auto Regressive Distributed Lag Approach," International Journal of Economics and Financial Issues, Econjournals, vol. 9(2), pages 138-144.
    5. Saleem, 2016. "Impact of Monetary Policy on Private Investment: Evidence from Pakistan," Journal of Finance and Economics Research, Geist Science, Iqra University, Faculty of Business Administration, vol. 1(2), pages 134-146, October.
    6. Maluleke, Glenda & Odhiambo, Nicholas M. & Nyasha, Sheilla, 2024. "The Determinants of Domestic Private Investment in Malawi: An Empirical Investigation," Economia Internazionale / International Economics, Camera di Commercio Industria Artigianato Agricoltura di Genova, vol. 77(3), pages 445-462.
    7. Samuel Kwabena Obeng & Linda Akoto & Felicia Acquah, 2018. "Democracy, Globalization and Private Investment in Ghana," Global Business Review, International Management Institute, vol. 19(1), pages 1-20, February.

    More about this item

    Keywords

    Private investment; Time series; Government expenditure; Interest rate;
    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
    • E20 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - General (includes Measurement and Data)
    • E22 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Investment; Capital; Intangible Capital; Capacity
    • E60 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - General

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