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Public and private investments and economic growth in Ghana and Kenya

Author

Listed:
  • Mose Naftaly

    (University of Eldoret, Kenya)

  • Fumey Michael Provide

    (Northwestern Polytechnical University, China)

Abstract

A general conception is that investment induces economic growth, but there is still debate over which type of investment contributes more to economic growth. The disaggregation of investment into public and private components allows estimation of the impact of the two types of investments on economic growth. This research, therefore, empirically estimates the relationship between each investment component against economic growth by constructing panel data for Ghana and Kenya from 1991 to 2022. The empirical strategy adopted in this study can be divided into three major stages. First, the LLC unit root test in the panel series is undertaken. Second, if integrated in the same order, a Kao co-integration test is conducted. Finally, if the series is co-integrated, the vector of cointegration in the long run is estimated using the dynamic ordinary least squares (DOLS) method. Our estimation results, based on the panel cointegration approach confirm a long-run relationship between the study variables. Further analysis shows that public investment can promote economic growth in the long run. In contrast, the results indicate that private investment can obstruct growth. The study has shown that private investment did not always increase economic growth in Ghana and Kenya. The study findings indicate that public investment is more efficiently allocated in Ghana and Kenya than private investment, suggesting the best economic strategy is for private investment to be complementary and promote higher public investment to improve public sector productivity. Therefore, policymakers should focus on creating a favourable investment climate, providing fiscal stimulus and promoting public-private partnerships to enhance infrastructure development and stimulate private -sector investment, which can sustain long-term economic growth.

Suggested Citation

  • Mose Naftaly & Fumey Michael Provide, 2024. "Public and private investments and economic growth in Ghana and Kenya," Financial Internet Quarterly (formerly e-Finanse), Sciendo, vol. 20(3), pages 29-41.
  • Handle: RePEc:vrs:finiqu:v:20:y:2024:i:3:p:29-41:n:1003
    DOI: 10.2478/fiqf-2024-0017
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    More about this item

    Keywords

    Economic Growth; Investment Project Financing; Private Investment; Public Investment;
    All these keywords.

    JEL classification:

    • E22 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Investment; Capital; Intangible Capital; Capacity
    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence
    • R42 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Transportation Economics - - - Government and Private Investment Analysis; Road Maintenance; Transportation Planning

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