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External Constraints on Private Investment Decisions in Developing Countries

In: Trade, Aid and Development

Author

Listed:
  • E. V. K. FitzGerald
  • Karel Jansen
  • Rob Vos

Abstract

To the extent that structural adjustment consists of more than macro-economic stabilisation, it must logically involve an increase in productive investment in the traded sector so that exports, national income and eventually employment can recover. However, in the view of both the World Bank and its critics (see e.g. World Bank, 1990; Mosley, Harrigan and Toye, 1991), despite a decade or more of strenuous attempts at adjustment, the record of private investment recovery has been poor. In the words of a recent survey of private investment behaviour in developing countries: in many countries, macroeconomic adjustment has not improved the response of private investment. Even when substantial progress has been made in correcting imbalances and restoring profitability — often through drastic cuts in real wages — the effect on private investment has been week and slow to appear. Many of these issues are difficult to explain in the context of conventional investment theories (Serven and Solimano, 1992a, p. 96).

Suggested Citation

  • E. V. K. FitzGerald & Karel Jansen & Rob Vos, 1994. "External Constraints on Private Investment Decisions in Developing Countries," Palgrave Macmillan Books, in: Jan Willem Gunning & Henk Kox & Wouter Tims & Ynto Wit (ed.), Trade, Aid and Development, chapter 11, pages 185-219, Palgrave Macmillan.
    • Handle: RePEc:pal:palchp:978-1-349-23169-0_11
    DOI: 10.1007/978-1-349-23169-0_11
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    Cited by:

    1. Ahmet Aysan & Gaobo Pang & Marie-Ange Veganzones-Varoudakis, 2009. "Uncertainty, economic reforms and private investment in the Middle East and North Africa," Applied Economics, Taylor & Francis Journals, vol. 41(11), pages 1379-1395.
    2. Marie-Ange VEGANZONES-VAROUDAKIS & PANG & Ahmet Faruk AYSAN, 2006. "Assessing the Responsiveness of Private Investment to Economic Reforms: The Case of MENA Countries," Working Papers 200623, CERDI.
    3. Jansen, Karel, 1995. "The macroeconomic effects of direct foreign investment: The case of Thailand," World Development, Elsevier, vol. 23(2), pages 193-210, February.

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