Does Domestic Investment Contribute to Economic Growth in Uruguay? What did the Empirical Facts Say?

Bakari, Sayef and Tiba, Sofien and Fakraoui, Nissar (2019): Does Domestic Investment Contribute to Economic Growth in Uruguay? What did the Empirical Facts Say?

Abstract

The fundamental role of domestic investment to provide economic prosperity is very well recognized by the economic theory since the Mercantilist theory. Hence, we investigate the impact of domestic investment on economic growth for the case of the Uruguayan economy over the period 1960-2017. For this aim, we employ the Vector Error Correction Model (VECM). Our highlights reveal the absence of a significant impact of domestic investment on growth in the short- and long-run. Due to the marginal role of domestic investment played in the Uruguayan economy, the weak saving rate couldn’t significantly help the economy and creating wealth. Therefore, a strong saving policy is required to encourage domestic investors and reevaluate their crucial role in the economic process of Uruguay.

• Item Type: MPRA Paper
• Language: English
• Keywords: Domestic investment, Economic growth, VECM, Uruguay.
• Subjects: E - Macroeconomics and Monetary Economics > E2 - Consumption, Saving, Production, Investment, Labor Markets, and Informal Economy; E - Macroeconomics and Monetary Economics > E2 - Consumption, Saving, Production, Investment, Labor Markets, and Informal Economy > E22 - Investment ; Capital ; Intangible Capital ; Capacity; E - Macroeconomics and Monetary Economics > E2 - Consumption, Saving, Production, Investment, Labor Markets, and Informal Economy > E23 - Production; O - Economic Development, Innovation, Technological Change, and Growth > O4 - Economic Growth and Aggregate Productivity; O - Economic Development, Innovation, Technological Change, and Growth > O4 - Economic Growth and Aggregate Productivity > O40 - General; O - Economic Development, Innovation, Technological Change, and Growth > O4 - Economic Growth and Aggregate Productivity > O47 - Empirical Studies of Economic Growth ; Aggregate Productivity ; Cross-Country Output Convergence; O - Economic Development, Innovation, Technological Change, and Growth > O5 - Economywide Country Studies > O54 - Latin America ; Caribbean

References

Adams, S. (2009) ‘Foreign Direct Investment, Domestic Investment, and Economic Growth in Sub-Saharan Africa’, Journal of Policy Modelling, 31, 939–49.

Bakari, S. (2017d). Appraisal of trade: Potency on economic growth in Sudan: New empirical and policy analysis. Asian Development Policy Review, 5(4), 213-225.

Bakari, S. (2017c). The long run and short run impacts of exports on economic growth: Evidence from Gabon. The Economic Research Guardian. 7(1), 40-57.

Bakari, S. (2017a). The Impact of domestic investment on economic growth: New evidence from Malaysia. Journal of Smart Economic Growth, 2(2), 105- 121.

Bakari, S (2017b). “The Relationship between Export, Import, Domestic Investment and Economic Growth in Egypt: Empirical Analysis.” EuroEconomica. Issue 2(36)/2017.

Bakari, S. (2018). The Impact of Domestic Investment on Economic Growth: New Policy Analysis from Algeria. Bulletin of Economic Theory and Analysis, 3(1), 35-51.

Bakari, S (2019). "If France Continues This Strategy, Taxes Will Destroy Domestic Investment And Economic Growth," Journal of Smart Economic Growth, , vol. 4(1), pages 31-45, Mars.

Bakari, S & Fakraoui, N & Tiba, S (2019). Domestic Investment, Export, Import and Economic Growth in Brazil: An Application of Vector Error Correction Model. MPRA Paper No. 95474, University Library of Munich, Germany.

Bakari, S & Mabrouki, M. & Elmakki, A. (2018a). The Impact of Domestic Investment in the Industrial Sector on Economic Growth with Partial Openness: Evidence from Tunisia. Economics Bulletin. 38(1): 111-128.

Bakari, S & Mabrouki, M & Othmani A (2018b). "The Six Linkages between Foreign Direct Investment, Domestic Investment, Exports, Imports, Labor Force and Economic Growth: New Empirical and Policy Analysis from Nigeria". Journal of Smart Economic Growth, Volume 3, Number 1, Year 2018.

Bakari, S & Tiba, S., (2019). The Impact of Trade Openness, Foreign Direct Investment and Domestic Investment on Economic Growth: New Evidence from Asian Developing Countries. Economic Research Guardian 9(1), pages 46-54.

Bouchoucha, N & Bakari, S, (2019). "The Impacts of Domestic and Foreign Direct Investments on Economic Growth: Fresh Evidence from Tunisia," MPRA Paper 94816, University Library of Munich, Germany.

Devarajan, S., Swaroop, V., & Heng-fu, Z. (1996). The composition of public expenditure and economic growth. Journal of Monetary Economics, 37, 313–344.

Dickey, D. A., & Fuller, W. A. (1979). Distribution of estimators of autoregressive time series with a unit root. Journal of the American Statistical Association, 74, 427-31.

Dickey, D. A., & Fuller, W. A. (1981). Likelihood ratio statistics for autoregressive time series with a unit root. Econometrica, 49(4), 1057-72.

Fakraoui, N & Bakari, S (2019). "Tie Among Domestic Investment, Exports And Economic Growth: Empirical Analysis From India," Journal of Smart Economic Growth, , vol. 4(1), pages 1-15, Mars.

Firebaugh, G (1992). Growth effects of foreign domestic investment, American Journal of Sociology, 98(1): 105 – 130, http://dx.doi.org/10.1086/229970

Forgha, N. G., & Mbella, M. E. (2014). External debt, domestic investment and economic growth in Cameroon: A system estimation approach. Journal of Economics Bibliography, 1(1), 3-16.

German-Soto, V.& Bustillos, H.A.B. (2014). The Nexus between Infrastructure Investment and Economic Growth in the Mexican Urban Areas. Modern Economy. 5: 1208-1220.

Jibir, A., & Abdu, M. (2017). Foreign direct investment- growth nexus: The case of Nigeria. European Scientific Journal, 13(1), 304-318.

Johansen, S. (1988). Statistical analysis of cointegration vectors. Journal of Economic Dynamics and Control, 12(2–3), 231 – 254.

Johansen, S. (1991). Estimation and hypothesis testing of cointegration vectors in gaussian vector autoregressive models. Econometrica, 59, 1551-1580.

Johansen, S., & Juselius, K. (1990). Maximum likelihood estimation and inference on cointegration, with applications to the demand for money. Oxford Bulletin of Economics and Statistics, 52, 169-210.

Keho, Y. (2017). The exports and economic growth nexus in Cote D'ivoire: Evidence from a multivariate time series analysis. Asian Journal of Economic Modelling, 5(2), 135-146.

Khan, M. S. (1996). Government investment and economic growth in the developing world. The Pakistan Development Review, 35, 419–439.

Mbulawa, S. (2017). The impact of economic infrastructure on long term economic growth in Botswana. Journal of Smart Economic Growth, 2(1), 15-33.

Siddique, H. M. A., Ullah, K., & Haq, I. U. (2017). External debt and economic growth nexus in Pakistan. International Journal of Economics and Empirical Research, 5(2), 73-77.

Sims, C. A. (1980). Macroeconomics and Reality. Econometrica, 48(1), 1-48.

Tiba, S & Omri, A. & Frikha M., (2015). The four-way linkages between renewable energy, environmental quality, trade and economic growth: a comparative analysis between high and middle-income countries. Energy Systems 7, 103-144.

Tiba, S & Frikha, M., (2018). Income, trade openness and energy interactions: Evidence from simultaneous equation modeling. Energy 147, 799-211.

Tiba, S & Frikha, M., (2018). Africa is rich, Africans are poor! An application of the cointegration technique. Journal of the Knowledge Economy, ISSN 1868-7865, pp. 1 - 26.

Tiba, S & Frikha, M., (2019). The controversy of the resource curse and the environment in the SDGs background: The African context. Resources Policy 62, 437-452.

Tiba, S & Frikha, M., (2019). ECK and Macroeconomics Aspects of Well-being: A critical vision for a Sustainable future. Journal of the Knowledge Economy, ISSN 1868-7865, pp. 1 - 27.

Tiba, S & Frikha, M., (2019). Sustainability concern in the agenda of African countries: Evidence from simultaneous equations models. Journal of the Knowledge Economy, ISSN 1868-7865, pp. 1 - 25.

Tiba, S., (2019). Revisiting and revising the energy-growth nexus: A non-linear modeling analysis. Energy 178, 667-675.

Tiba, S., (2019). Exploring the Nexus Between Oil Availability and Economic Growth: Insights from Non-Linear Model. Environmental Modeling & Assessment. ISSN 1420-2026, pp. 1 - 12.