Version 1
: Received: 31 January 2022 / Approved: 31 January 2022 / Online: 31 January 2022 (11:15:23 CET)
How to cite:
Pamba, D. Crowding in or crowding out? Public Investment and Private Investment in South Africa: An ECM Approach. Preprints2022, 2022010450. https://doi.org/10.20944/preprints202201.0450.v1
Pamba, D. Crowding in or crowding out? Public Investment and Private Investment in South Africa: An ECM Approach. Preprints 2022, 2022010450. https://doi.org/10.20944/preprints202201.0450.v1
Pamba, D. Crowding in or crowding out? Public Investment and Private Investment in South Africa: An ECM Approach. Preprints2022, 2022010450. https://doi.org/10.20944/preprints202201.0450.v1
APA Style
Pamba, D. (2022). Crowding in or crowding out? Public Investment and Private Investment in South Africa: An ECM Approach. Preprints. https://doi.org/10.20944/preprints202201.0450.v1
Chicago/Turabian Style
Pamba, D. 2022 "Crowding in or crowding out? Public Investment and Private Investment in South Africa: An ECM Approach" Preprints. https://doi.org/10.20944/preprints202201.0450.v1
Abstract
This study aims to explore the link between public investment and private investment in South Africa, using time series data spanning 40 years (1980–2020). Private investment is subdivided into credit to private sector (CPS) and foreign direct investment (FDI). Several econometric methodologies were used in the study, including the unit root test, cointegration test, and Error Correction Method (ECM). The Phillips-Perron (PP) test results point out that all the variables are stationary at levels with the exception of public investment (PI) which is stationary at first difference. The co-integration test reveals that the variables have a long-run equilibrium relationship. According to the findings of the ECM, public investment has a negative relationship with private investment (as measured by credit to private sector and foreign direct investment). The conclusion implies that in South Africa, public investment crowds out private investment. Other results revealed that, RGDP crowds in credit to private sector while crowding out foreign direct investment. Finally, the ECM findings show that government consumption expenditure crowds out credit to private sector and foreign direct investment. The residuals are homoskedastic and show no serial correlation, indicating that the model is adequate, according to the test for adequacy.
Keywords
Credit to Private Sector; Foreign Direct Investment; Government Consumption Expenditure; Public Investment; Error Correction Model and South Africa
Subject
Business, Economics and Management, Economics
Copyright:
This is an open access article distributed under the Creative Commons Attribution License which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited.
