Article Sidebar

Submitted
September 22, 2023
Accepted
April 23, 2024
Published
April 30, 2024
Download
Full text PDF
Statistic
Read Counter : 54 Download : 47

Downloads

Download data is not yet available.

Main Article Content

Abstract

Purpose ─ This paper examines the determinants of private investment. The result can help the government determine which investment drivers to consider when formulating policies to stimulate private investment.
Methodology ─ It uses a Nonlinear Autoregressive Distributed Lag (NARDL) estimation approach with time series data from 1965 to 2022.
Findings ─ The results indicate that positive shocks in economic growth lead to an increase in private investment over the long term. Conversely, both positive and negative shocks in inflation are found to positively impact private investment in the long run. Additionally, domestic credit to the private sector has a negative impact in both the short and long term.
Implications ─ The government should develop policies designed to create an environment conducive to private investment. These policies should focus on ensuring easy access to finance, enhancing the openness of the economy, and maintaining a low and stable inflation rate.
Originality ─ Few studies have fully explored the important drivers of private investment, especially in South Africa. Moreover, the studies conducted in South Africa have used other cointegration techniques, which are relatively weak compared to the NARDL used in the current study.

Keywords

Private investment Economic growth Government policy ARDL approach

Article Details

Creative Commons License

This work is licensed under a Creative Commons Attribution-ShareAlike 4.0 International License.

How to Cite
Maluleke, G. (2024). The determinants of private investment: Evidence from South Africa. Economic Journal of Emerging Markets, 16(1), 89–100. https://doi.org/10.20885/ejem.vol16.iss1.art8
Download Citation
Endnote/Zotero/Mendeley (RIS)
BibTeX

References

  1. Abbas, A., Abbas, Z., & Mustifa, G. (2022). An empirical analysis of sector-wise private investment for a small open economy. Development Studies Research, 9(1), 21–35. https://doi.org/10.1080/21665095.2022.2032235
  2. Akçay, S., & Karasoy, A. (2020). Determinants of private investments in Turkey: Examining the role of democracy. Review of Economic Perspectives, 20(1), 23–49.
  3. Al-Sadig, A. (2013). The effects of foreign direct investment on private domestic investment: evidence from developing countries. Empirical Economics, 44(3), 1267–1275.
  4. Awad, I. M., Al-Jerashi, G. K., & Alabaddi, Z. A. (2021). Determinants of private domestic investment in Palestine: time series analysis. Journal of Business and Socio-Economic Development, 1(1), 71–86.
  5. Ayeni, R. K. (2020). Determinants of private sector investment in a less developed country: a case of the Gambia. Cogent Economics & Finance, 8(1), 1794279. https://doi.org/10.1080/23322039.2020.1794279
  6. Bello Ajide, K., & Lawanson, O. (2012). Modelling the Long Run Determinants of Domestic Private Investment in Nigeria. Asian Social Science, 8(13). https://doi.org/10.5539/ass.v8n13p139
  7. Benlarbi, A., & Hachi, F. O. (2023). An empirical analysis of the determinants of private investment in South Korea: Using nonlinear model analysis: دراسة تحليلية حول محددات الاستثمار الخاص في كوريا الجنوبية: باستخدام نماذج التحليل اللاخطي. Journal of North African Economies, 19(33), 43–64.
  8. Boachie, M. K., Ruzima, M., & Immurana, M. (2020). The concurrent effect of financial development and trade openness on private investment in India. South Asian Journal of Macroeconomics and Public Finance, 9(2), 190–220.
  9. Cheah, S.-P., Yiew, T.-H., & Ng, C.-F. (2017). A nonlinear ARDL analysis on the relation between stock price and exchange rate in Malaysia. Economics Bulletin, 37(1), 336–346.
  10. Fonchamnyo, D. C., Dinga, G. D., & Ngum, V. C. (2021). Revisiting the nexus between domestic investment, foreign direct investment and external debt in SSA countries: PMG‐ARDL approach. African Development Review, 33(3), 479–491.
  11. Geddafa, T. (2023). Trends and determinants of domestic private investment in Ethiopia: Time series analysis. Cogent Engineering, 10(2), 2283293.
  12. Ghura, D. (1997). Private Investment and Endogenous Growth: Evidence From Cameroon. IMF Working Papers, 97(165), 1. https://doi.org/10.5089/9781451980004.001
  13. Gondim, I., Ogasavara, M. H., & Masiero, G. (2018). Effects of outward foreign direct investment on domestic investment: The cases of Brazil and China. Journal of International Development, 30(8), 1439–1454.
  14. Hassan, A. F. M. K., & Salim, R. A. (2011). Determinants of private investment: time series evidence from Bangladesh. The Journal of Developing Areas, 229–249.
  15. Jobir, M. N. (2023). Determinants of private investment performance in Ethiopia. International Journal of Accounting, Finance and Risk Management, 8(3), 57–67.
  16. Johansen, S., & Juselius, K. (1990). Maximum likelihood estimation and inference on cointegration with applications to the demand for money. In Oxford Bulletin of Economics and Statistics (Vol. 52, Issue 2, pp. 169–210). https://doi.org/10.1111/j.1468-0084.1990.mp52002003.x
  17. Karagöz, K. (2010). Determining factors of private investments: An empirical analysis for Turkey. Sosyoekonomi, 11(11).
  18. Magableh, S. I., & Ajlouni, S. A. (2016). Determinants of private investment in Jordan: An ARDL bounds testing approach. Dirasat, Administrative Sciences, 43(1), 263–274.
  19. Majeed, M. T., & Khan, S. (2008). The determinants of private investment and the relationship between public and private investment in Pakistan. Journal of Business and Economics, 1(1), 41–48.
  20. Maluleke, G., Odhiambo, N. M., & Nyasha, S. (2023). the Determinants of Domestic Private Investment in Malawi : an Empirical Investigation. Economia Internazionale/International Economics.
  21. Malumisa, S. (2013). Comparative analysis of the determinants and behaviour of investment demand between South Africa and Zimbabwe. Journal of Economics and Behavioral Studies, 5(6), 385–397.
  22. Medhioub, I., & Makni, M. (2020). Oil price and stock market returns uncertainties and private investment in Saudi Arabia. Economic Journal of Emerging Markets, 208–219.
  23. Michael, I. M., & Aikaeli, J. (2014). Determinants of private investment in Tanzania. African Journal of Economic Review, 2(2), 39–52.
  24. Misati, R. N., & Nyamongo, E. M. (2011). Financial development and private investment in Sub-Saharan Africa. Journal of Economics and Business, 63(2), 139–151.
  25. Molocwa, G. A., Choga, I., & Mongale, I. P. (2018). Determinants of private fixed investment in emerging country. Risk Governance & Control: Financial Markets & Institutions, 8(1).
  26. Mose, N., Jepchumba, I., & Ouru, L. (2020). Macroeconomic determinants of domestic private investment behaviour. African Journal of Economics and Sustainable Development, 3(2), 30–37.
  27. Mutenyo, J., & Asmah, E. (2010). Does foreign direct investment crowd-out domestic private investment in Sub-Saharan Africa? African Finance Journal, 12(1), 27–52.
  28. National Treasury. (2018). National Budget 2018. http://www.treasury.gov.za/documents/nationalpercent20budget/2018/review/Annexurepercent20E.pdf
  29. Ngoma, G., Bonga, W. G., & Nyoni, T. (2019). Macroeconomic Determinants of private investment in sub-Saharan Africa. DRJ’s Journal of Economics & Finance, 4(3), 1–8.
  30. Omojolaibi, J. A., Okenesi, T.-N. P., & Mesagan, E. P. (2016). Fiscal policy and private investment in selected West African countries. CBN Journal of Applied Statistics, 7(1), 277–309.
  31. Ouédraogo, R., Sawadogo, R., & Sawadogo, H. (2020). Private and public investment in sub-Saharan Africa: The role of instability risks. Economic Systems, 44(2), 100787.
  32. Pesaran, M. H., Shin, Y., & Smith, R. J. (2001). Bounds testing approaches to the analysis of level relationships. Journal of Applied Econometrics, 16(3), 289–326. https://doi.org/10.1002/jae.616
  33. Ribeiro, M. B., & Teixeira, J. R. (2001). An econometric analysis of private-sector investment in Brazil. CEPAL Review, 2001(74), 153–166. https://doi.org/10.18356/079260f6-en
  34. Sakr, K. (1993). Determinants of Private Investment in Pakistan. IMF Working Papers, 93(30), 1. https://doi.org/10.5089/9781451844863.001
  35. Semra, B. (2020). Determinants of Private Investment in Turkey: An ARDL Bounds Testing Approach. Euroasia Journal of Social Sciences & Humanities, 7(11), 127–142.
  36. Seruvatu, E., & Jayaraman, T. K. (2001). Determinants of private investment in Fiji. Citeseer.
  37. Shankar, S., & Trivedi, P. (2021). Government fiscal spending and crowd-out of private investment: An empirical evidence for India. Economic Journal of Emerging Markets, 92–108.
  38. Shin, Y., Yu, B., & Greenwood-Nimmo, M. (2014). Modelling asymmetric cointegration and dynamic multipliers in a nonlinear ARDL Framework. In R. Sickles & W. Horrace (Eds.), Festschrift in Honor of Peter Schmidt (pp. 281–314). Springer. https://doi.org/10.1007/978-1-4899-8008-3_9
  39. Shrestha, M. B., & Chowdhury, K. (2007). Testing financial liberalization hypothesis with ARDL modelling approach. Applied Financial Economics, 17(18), 1529–1540.
  40. Tan, B. W., & Tang, C. F. (2011). The dynamic relationship between private domestic investment, the user cost of capital, and economic growth in Malaysia. Economia Politica, 30(2), 221–246.
  41. World Bank. (2023). World Development Indicators. https://databank.worldbank.org/data/source/world-development-indicators#