Selected Macroeconomic Variables Affecting Private Investment in Malawi

Assa, Maganga and Abdi, Edriss K. (2012): Selected Macroeconomic Variables Affecting Private Investment in Malawi. Forthcoming in: Journal of Economics and Sustainable Development

Abstract

This study provides an empirical test of the macroeconomic variables that can potentially affect private investment decisions in Malawi in a short and long run perspective using time series data. Both the theory and the empirical literature are reviewed in order to identify a private investment function for the last three decades (1979-2009). The results reveal that investment decisions seem to be determined by public investment, bank credit to the private sector and the real interest rate in the short run. Besides, there is evidence of a crowding-out effect of public investment. In the long run, the capital accumulation path seems to be closely dependent on both GDP growth and real exchange rates.

• Item Type: MPRA Paper
• Language: English
• Keywords: Co-integration, Crowding-out, Error Correction Model, Malawi, Private investment
• Subjects: E - Macroeconomics and Monetary Economics > E6 - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook > E62 - Fiscal Policy

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