Abstract
The study investigates the determinants of private investment in South Africa and Zimbabwe employing annual data over the 1980-2010 periods. The influence of gross domestic product (GDP), government debt, inflation, and interest rate policies are considered. Applied vector autoregressive and error correction models are used to estimate long- and short-run relationships among variables. The results suggest that GDP has a positive effect on private investment. Government debt has a crowding out effect on private investment, and inflation is shown to negatively affect investment. Increases in interest rates discourage private investment in South Africa
Highlights
In every economy, the development and growth of the private sector is essential
The desire to improve the performance of the private sector has shaped the macroeconomic policies in these two economies for some time, RSA and Zimbabwe still face some challenges in addressing factors which lead to desirable and sustainable levels of private investment
From theoretical foundations and empirical research done for most developing countries, this study has investigated the determinants of private investment in RSA and Zimbabwe in the period 1980-2010
Summary
The development and growth of the private sector is essential. From organizations to economies, all have sought to improve the performance of the private sector. The desire to improve the performance of the private sector has shaped the macroeconomic policies in these two economies for some time, RSA and Zimbabwe still face some challenges in addressing factors which lead to desirable and sustainable levels of private investment. Triggering the low investment levels and GDP growth rates in Zimbabwe has been the tough economic environment. The investment friendly interest rates, stable exchange rate, low government debts and well-contained inflation rate are some of the factors, which played significant roles to bolster investment The outcome of such has been depicted in positive economic growth over these years, which culminated to avoiding severe effects of the 2008-09 global financial crises
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