Munich Personal RePEc Archive

Nexus of infrastructure investment, economic growth and domestic credit level: evidence from China based on nonlinear ARDL approach

Zichu, Jin and Masih, Mansur (2018): Nexus of infrastructure investment, economic growth and domestic credit level: evidence from China based on nonlinear ARDL approach.

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Abstract

Infrastructure has experienced a rapid development in China over the past decade. The economic contribution of infrastructure investment has been widely examined in the literature using various data and models. However, the results are inconclusive. This paper using Nonlinear ARDL tests the effect of infrastructure investment on both GDP and domestic private credit level. The paper finds that an increase in infrastructure investment will increase GDP but push the domestic credit level higher. The contribution of this paper is that a stable investment in infrastructure is needed, while the efficiency of the management is also important. Government should take care of the debt level and reduce the debt leverage, as more debt will eventually drag the economy down.

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