PRIVATE SECTOR INVESTMENT AND ECONOMIC GROWTH IN PALESTINE

Abstract

This study examines the impact of private sector investment on economic growth in Palestine using quarterly time series data from 1990-2015. Multiple regression and co-integration methods are employed to analyse the data. The objectives of this study are to analyse the trends of private investment and economic growth in Palestine from 1990­-2015 and to examine the impact of private sector investment on economic. Being a time series data, to avoid spurious regression results, the first step is to test for the stationarity of the data by using Augmented Dickey-Fuller unit root test. Then ordinary least square (OLS) regression technique is used to estimate of each independent variable effect on the dependent variable. Test the stationary of the error term is done to test the long run co-integration among variables. The result of stationarity and normality test will reveal that the model is fairly well specified and could be used for policy analysis or not. The co-integration test result will indicate that private sector investment and economic growth have a long run significant effect on one another. The unit root tests, which conducted, confirm that variables are stationary in first difference and the co-integration tests also confirm the existence of long term relationship between the variables. The findings of the study concluded that there exist a short-run and long run relationship between private sector investment and economic growth in Palestine. This study recommends the Palestinian government to promote and encourage both domestic and foreign direct investment. The investment policy should be more transparent, attractive and competitive