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Private investment in developing countries: The effects of commodity shocks and uncertainty

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  • Jan Dehn

Abstract

The link between ex post discrete shocks and private investment have never been formally tested in a panel data context, while the evidence of a link between ex ante commodity price uncertainty and investment is weak. This paper constructs measures of discrete shocks and uncertainty using a new multi-country data set of aggregate commodity price indices, and tests the relationship between various manifestations of commodity price variability and private investment rates within the context of a canonical empirical investment model estimated on a sample of 44 developing countries. The analysis confirms theoretical predictions that positive ex post commodity price shocks have strong positive effects on private investment rates in low income developing countries, conditional upon the level of commodity prices. It is also shown that the prospect of uncertain future commodity prices andex post negative shocks do not affect private investment rates.

Suggested Citation

  • Jan Dehn, 2000. "Private investment in developing countries: The effects of commodity shocks and uncertainty," CSAE Working Paper Series 2000-11, Centre for the Study of African Economies, University of Oxford.
    • Handle: RePEc:csa:wpaper:2000-11
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    Cited by:

    1. Muyambiri, Brian & Chiwira, Oscar & Enowbi Batuo, Michael & Chiranga, Ngonidzashe, 2010. "The Causal Relationship between Private and Public Investment in Zimbabwe," MPRA Paper 26671, University Library of Munich, Germany.
    2. Misati, Roseline Nyakerario & Nyamongo, Esman Morekwa, 2011. "Financial development and private investment in Sub-Saharan Africa," Journal of Economics and Business, Elsevier, vol. 63(2), pages 139-151.
    3. Masino, Serena, 2012. "Macroeconomic instability and the incentive to innovate," MPRA Paper 38766, University Library of Munich, Germany.
    4. Mellati, Ali, 2008. "Uncertainty and investment in private sector: An analytical argument and a review of the economy of Iran," MPRA Paper 26655, University Library of Munich, Germany.
    5. Silvia Dal Bianco & Nguyen Cong To Loan, 2017. "FDI Inflows, Price and Exchange Rate Volatility: New Empirical Evidence from Latin America," IJFS, MDPI, vol. 5(1), pages 1-17, February.
    6. Masino, Serena, 2013. "Macro-Institutional Instability and the Incentive to Innovate," MPRA Paper 45938, University Library of Munich, Germany.
    7. Arestis, Philip & Gonzalez-Martinez, Ana Rosa, 2016. "Revisiting the accelerator principle in a world of uncertainty: Some empirical evidence," Economic Modelling, Elsevier, vol. 56(C), pages 35-42.
    8. Pei-Tha Gan, 2019. "Economic uncertainty, precautionary motive and the augmented form of money demand function," Evolutionary and Institutional Economics Review, Springer, vol. 16(2), pages 397-423, December.
    9. repec:hur:ijarbs:v:5:y:2015:i:2:p:302-313 is not listed on IDEAS
    10. Nesrine Dardouri & Abdelkader Aguir & Ramzi Farhani & Mounir Smida, 2023. "Revisiting the Determinants of Investment- The Case of Tunisia," Post-Print hal-04101430, HAL.
    11. Mr. Shaun K. Roache, 2006. "Domestic Investment and the Cost of Capital in the Caribbean," IMF Working Papers 2006/152, International Monetary Fund.
    12. Serena Masino, 2012. "Macroeconomic Instability and the Incentive to Innovate," Centre for Growth and Business Cycle Research Discussion Paper Series 167, Economics, The University of Manchester.
    13. Masino, Serena, 2012. "Macroeconomic instability and the incentive to innovate," MPRA Paper 38830, University Library of Munich, Germany.
    14. Gerasimos T. Soldatos, 2019. "Public-private investment substitutability-complementarity, taxation, and bank competition," ECONOMIA PUBBLICA, FrancoAngeli Editore, vol. 2019(3), pages 41-61.
    15. Rasaki, Mutiu Gbade & Malikane, Christopher, 2015. "Macroeconomic shocks and fluctuations in African economies," Economic Systems, Elsevier, vol. 39(4), pages 675-696.
    16. Shaun K. Roache, 2006. "Domestic Investment and the Cost of Capital in the Caribbean," Applied Econometrics and International Development, Euro-American Association of Economic Development, vol. 6(3).
    17. Lutfi Erden & Randall G. Holcombe, 2006. "The Linkage Between Public and Private Investment: A Co-integration Analysis of a Panel of Developing Countries," Eastern Economic Journal, Eastern Economic Association, vol. 32(3), pages 479-492, Summer.
    18. Misati, Roseline Nyakerario & Nyamongo, Esman Morekwa, 2011. "Financial development and private investment in Sub-Saharan Africa," Journal of Economics and Business, Elsevier, vol. 63(2), pages 139-151, March.

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