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Private Investment in Developing Countries: An Empirical Analysis

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  • International Monetary Fund

Abstract

This paper analyzes the effects of several policy and other macro-economic variables on the ratio of private investment to GDP in developing countries. Using data for a sample of 23 developing countries over the period 1975-87, the econometric evidence indicates that the rate of private investment is positively related to the real growth rate of GDP, public sector investment, and to a lesser extent the level of per capita GDP, while it is negatively related to domestic inflation, the debt service ratio, the debt-to-GDP ratio, and high real interest rates. There is also some indication that all but the last of these variables had a greater impact before the onset of the debt crisis in 1982, while the debt-to-GDP ratio (a measure of a country’s debt overhang) has become more important since then.

Suggested Citation

  • International Monetary Fund, 1990. "Private Investment in Developing Countries: An Empirical Analysis," IMF Working Papers 1990/040, International Monetary Fund.
    • Handle: RePEc:imf:imfwpa:1990/040
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    Cited by:

    1. Ozler, Sule & Rodrik, Dani, 1992. "External shocks, politics and private investment : Some theory and empirical evidence," Journal of Development Economics, Elsevier, vol. 39(1), pages 141-162, July.
    2. Mr. Philip R. Gerson, 1998. "The Impact of Fiscal Policy Variables on Output Growth," IMF Working Papers 1998/001, International Monetary Fund.
    3. Quan V. Le, 2004. "Political and economic determinants of private investment," Journal of International Development, John Wiley & Sons, Ltd., vol. 16(4), pages 589-604.

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