PUBLIC, PRIVATE AND FOREIGN INVESTMENT NEXUS IN THE REPUBLIC OF NORTH MACEDONIA: CROWDING-IN OR OUT EFFECT?

During the late 1970s and early 1980s, many African countries experienced a profound slowdown in economic growth. The growth rate of real per capita GDP fell from 0.4% per year during the 1973-80 period to 1.2% per year during the 1980-89 period.' The causes-internal and external-of Africa's economic decline and the strategies for restoring economic growth are much debated. Nevertheless, broad consensus has emerged on the importance of (i) increasing total investment and (ii) promoting private-sector development and increasing its share of total investment for long-term growth.2 It is widely recognized that gross domestic investment fell substantially in Africa during the 1980s and remains severely depressed across the region. The proportion of total domestic investment in GDP fell from 20.8% per year during 1973-80 to 16.1% per year during 1980-89. In some countries, investment has fallen to less than 10% of GDP-a level that is insufficient even to replace depreciated capital. In Africa, the minimum investment needed to replace depreciated capital is estimated at 13% of GDP.3 In recent years, there has also been a growing recognition among many African leaders, faced with new realism and pragmatism, that the private sector could play a significant role in economic development. The focus in the longer term of structural adjustment programs and sectoral reforms adopted by these countries is on creating more appropriate incentives and a framework for private-sector development as the basis for achieving sustainable economic growth. In addition, multilateral and bilateral institutions have developed new initiatives with priorities for private-sector development. In 1989, the International Finance Corporation, an affiliate of the World Bank, es-

In view of a macroeconomic context characterized by the revival of economic growth and the vision of having a better Togo in 2030, we have witnessed in recent years a major campaign to promote both domestic and foreign direct investment. Given the theoretical ambiguity of the relationship between these different types of investments, we offer in this paper an empirical validation of the interactions within the triptych FDI - public investment - domestic private investment. Estimates using a VECM showed that long-run private investment has a ripple effect on both foreign direct investment and public investment, which conversely also have a positive influence on domestic private investment. In addition, there is no significant relationship between public investment and FDI. Regarding the short term, there is a training of public investment in the previous period effect on FDI while domestic private investment tends to oust. Finally, an increase in FDI stimulates in the short term, both public and domestic private investment. Key words: Foreign direct investment, public investment, private investment, VECM, Togo.

Abstract. This paper analyzes the causal effect between domestic private investment, public investment, foreign direct investment and economic growth in Tanzania during the 1970-2014 period. The modified neo-classical growth model is used to estimate the effect of investment on economic growth. Also, the economic growth models based on Phetsavong & Ichihashi ( 2012 ), and Le & Suruga ( 2005 ) are used to estimate the crowding out effect of public investment on domestic private investment on one hand and foreign direct investment on the other hand. In the same way, the crowding out effect of foreign direct investment on domestic private investment is estimated. A correlation test is applied to check the correlation among independent variables, and the results show that there is very low correlation suggesting that multicollinearity is not a serious problem. Moreover, the diagnostic tests including RESET regression errors specification test, Breusch-Godfrey serial correlation LM test, Jacque-Bera-normality test and white heteroskedasticity test reveal that the model has no signs of misspecification and that, the residuals are serially uncorrelated, normally distributed and homoskedastic. Broadly, the empirical results show that the domestic private investment and foreign direct investment play an important role in economic growth in Tanzania. Besides, a revealed negative, albeit weak, association between public and private investment suggests that the positive effect of domestic private investment on economic growth becomes smaller when public investment-to-GDP ratio exceeds 8-10 percent. Similarly, foreign direct investment tends to marginally reduce the impact of domestic private investment on growth. These results suggest that public investment and foreign direct investment need to be considered carefully in order to avoid a reduced positive impact of domestic private investment on growth. Domestic saving may be promoted to encourage domestic investment for economic growth. Keywords. Public investment, Domestic private investment, FDI, Crowding out effect, Economic growth. JEL. F21, F43, O40, O47 .

In the last two decades the economic growth of North Macedonia can be qualified as sluggish and volatile. In this period, the government has been proclaiming a narrative of fiscal and economic policies focused on public investment driven development and growth, yet the capital budget bias, has been significant with regularly overestimated plans vs. the outturn. The public investment-to-GDP ratio, has been an average 5.47%, ranging from minimum 4.0% (Y2007) to maximum 6.7% (Y2010). Simultaneously, the private investment-to-GDP ratio has been an average 17.1%, with minimum of 15% (in Y2005) and a maximum value of 20.6% (in Y2008). The FDI inflows, have been ranging from minimal below 1% in 2014 to maximum 12.7% in 2001, with average of 4.6% per annum. The trends of the variables straightforwardly do not suggest a nexus between public and private investments i.e. causing crowding-in or crowding out effect. In this paper it is investigated whether public investment and foreign direct investments crowd-out or crowd-in the private investment in North Macedonia. To test this hypothesis, we use the available annual data on private investment, public investment, foreign direct investments and GDP for the period of 2000-2017 (in real terms). A model of autoregressive distributed lag bound testing is used for the variables private investment, public investment, GDP and foreign direct investment. The results indicate a crowding-out effect of public over private investments with significance of the foreign direct investments are expected to show whether there is crowding-in or -out effect of the public over private investment and crowding-in effect of the foreign direct investments. The crowding-out effect is immediate and short run.

This paper examines the factors impacting economic growth and the interlinkages of public investment, foreign direct investment (FDI), and private domestic investment using a panel data sample of Brazil, Russia, India, China and South Africa (BRICS) group of nations covering the time period of 1990 to 2014. We have made use of economic growth models suggested by Vu Le and Suruga (2005) in order to estimate economic growth and the individual impact of public investment on FDI and private domestic investment, respectively. The empirical results indicate that the private domestic investment along with FDI play a significant role in contributing towards economic growth. Further, analysing the impact of public investment on FDI and private domestic investment suggests that an increase in public investment in BRICS nations reduces the positive impact of FDI and private domestic investment on economic growth (crowding-out effect) when exceeding certain extent levels. Hence, we can conclude that from an overall prospective, public investment in BRICS nations has a substitutable effect on FDI and private domestic investment.

To accelerate the GDP growth rate, the government of Bangladesh has been raising its public investment since late 2000s which is reflected in the rise of public investment-GDP ratio from 4.50% in 2008 to 6.90% in 2015. At the same time, private investment has remained stagnant since 2008, hovering around 22% of GDP. This trend of public and private investment suggests that public investment might have a crowding-out effect on private investment. Given this background, the main objective of this paper is to examine the relationship between public and private investment in Bangladesh over the period 1981-2015. To this end, we estimate a model in the autoregressive distributed lag bound testing framework using real private investment, real public investment, real GDP, and the real interest rate. In addition, since Bangladesh's trade and financial sectors went through intensive liberalization reform in the early 1990s, it warrants an investigation whether liberalization has any significant effect on the relationship between public and private investment. Hence, in this study, we pose an additional question of how the relationship between these two variables is affected by the liberalization of the financial and trade sectors - an issue received less attention in previous studies. To capture this effect, we extend our model by introducing a dummy variable for liberalization and an interaction term. Our results show that public investment negatively affects private investment both in the long run and short run, suggesting the existence of crowding-out. However, the crowding-out effect is partially neutralized by the favorable effect of liberalization. We also find that private investment is weakly sensitive to the real interest rate. These findings have important policy implications for both fiscal and monetary authorities. First, given the relatively large magnitude of crowding-out effect, it will be imperative for the fiscal authority to select those investment projects which have greater productivity and spillover effects so that crowding-out effect can be minimum. Second, the weak sensitivity of private investment to the interest rate points to a weak interest rate channel of monetary policy. Therefore, interest rate cut may not be successful in promoting private investment during economic down-turn. Third, as liberalization moderates the crowding out effect, Bangladesh can reap more benefit from public investment by removing the impediments to trade and financial deregulations.

This study examines the dynamic effects of public and private investments on India’s economic growth, focusing on disaggregating public sector investments into infrastructure and non-infrastructure Gross Fixed Capital Formation (GFCF). Key questions include: How do public infrastructure and non-infrastructure investments impact economic and private sector growth? What roles do Foreign Direct Investment (FDI), labour force participation, and the real interest rate play in shaping economic growth? The study uses the Autoregressive Distributed Lag (ARDL) model to analyze 40 years of macroeconomic data from 1980–81–2019–2020, offering insights into both short- and long-term effects. Findings reveal a crowding-out effect of public infrastructure investment on private investment in the short term but a crowding-in effect in the long run. FDI, labour participation, and the real interest rate significantly influence GDP growth, confirming their roles as critical drivers of economic expansion. Disaggregating public investments shows infrastructure and non-infrastructure investments play distinct roles in shaping economic outcomes. This study contributes by addressing the gap in understanding how different types of public investments affect private sector activity in India and broadens investment analysis by incorporating FDI, labour participation, and the real rate of interest, offering new evidence for research and policy formulation.

The intended purpose of this study was to investigate the contribution, constraints, trends and determinants of private domestic investment in Ethiopia by taking annual data set of 34 years spanning from 1987-2021. The objective was achieved by collecting secondary data. Accordingly, domestics private investment has contributed a lot for the growth of the national economic despite the constrains. The domestic private investment in Ethiopia has faced severe trend due to trends in economics system in the country, i.e., pre-1974, 1974-1991 and Post 1991. The determining factors in this study included private investment, foreign direct investment, inflation rate, access to credit, GDP per capita, lending interest rate, human capital, exchange rate, public investment, taxation and political stability. Accordingly, GDP per-capital, political stability, public investment and lending interest rate have significant positive long run effect on private investment, while human capital and exchange rate have negative long run effect. Public investment and political stability have positive significant effect while lending interest rate and exchange rate have negative significant effect in the short run. Finally, expansion of infrastructure, increasing income generation mechanism for citizens, appreciation of domestic currency and creating fertile investment climate are some of the recommendations forwarded.

This study explored the interaction between private and public investments and its effect on economic growth in Nigeria over the period 1986 to 2021. The analysis utilized annual time series data, including real Gross Domestic Product (GDP), private investment (proxied by gross fixed capital formation), public investment (proxied by government capital expenditure), exchange rate, and interest rate spread. The Autoregressive Distributed Lag (ARDL) Bounds Testing approach was employed to examine the existence of both short-run and long-run relationships among the variables. The objective was to assess the effect of the interaction between private and public investment on economic growth. The empirical results revealed that the model variables were cointegrated, suggesting a stable long-term equilibrium relationship. Furthermore, the interaction between private and public investments were found to have a statistically significant impact on economic growth in both the short run and the long run, highlighting the complementary nature of these investment types. The study recommends that government policy should focus on enhancing the synergy between public and private investment through the provision of critical infrastructure at reduced economic costs. Also the creation of a business-friendly environment fosters sustainable economic growth in Nigeria.

The study has estimated the extent of investment made in promotion of marketing infrastructure in the country and growth in public and private investments. It has also examined state-wise spread of private and public investments in agricultural marketing infrastructure, its composition and share and has investigated whether private investment induces pubic investment or vice versa. Of the total investment of Rs 157652.30 lakh made for the development of agricultural marketing infrastructure, Madhya Pradesh has accounted for the maximum (36%) share, followed by Tamil Nadu (18%) and Andhra Pradesh (13.5%). West Bengal has accounted for the lowest share. The analysis has indicated that there is a strong complementarity between private and public investments and as soon as private investment comes, public investment also starts pouring in. On investigating whether public investment is dependent on private investment or vice versa, the study has revealed that private investment induces public investment. The study has further indicated that in agricultural marketing infrastructure, private investment has taken a lead, which is a welcome change because private investment is more efficiently used as compared to public investment. To give further fillip to private investment in agricultural marketing infrastructure, the study has provided certain suggestions.

Is crude oil price detrimental to domestic private investment for an emerging economy? The role of public sector investment and financial sector development in an era of globalization

To close the gap in economic development relative to the EU average, Serbian economy has to achieve significantly higher growth rates in comparison to other European countries over the longer period. Theoretical and empirical literature indicates that the level of investment in physical capital is one of the key determinants of the dynamics of economic growth. In this paper, based on data on investments and savings in Serbia and in 37 countries that in the previous three decades achieved an average GDP growth rate of over 5% per year (so-called fast-growing economies - FGE), we present and analyze relevant stylized facts. In the observed period, FGE had average total investments of 25.6% of GDP, of which 69% was private and 31% public investments, whereby private investments were predominantly domestic, which is associated with a high rate of gross domestic savings (of 27.4% of GDP). On the other hand, total investments in Serbia were 9.7% of GDP lower than the FGE average, which was a consequence of significantly lower public and domestic private investments, which was, among other things, a consequence of significantly lower domestic savings (by over 20% of GDP). As in the recent period there has been a noticeable increase in public investments in Serbia, in order to accelerate economic growth, it is necessary, in addition to maintaining them at a high level, to encourage a considerable increase in domestic private investments through economic measures policy and wider reforms of the general institutional environment, with the aim of having the total level of investments of over 25% of GDP over the next few decades.

We study the macroeconomic effects of public and private investment in 17 OECD economies through a VAR analysis with annual data from 1960 to 2014. From impulse response functions we find that public investment had a positive growth effect in most countries, and a contractionary effect in Finland, UK, Sweden, Japan, and Canada. Public investment led to private investment crowding o ut in Belgium, Ireland, Finland, Canada, Sweden, the UK and crowding-in effects in the rest of the countries. Private investment has a positive growth effect in all countries; crowds-out (crowds-in) public investment in Belgium and Sweden (in the rest of the countries). The partial rates of return of public and private investment are mostly positive. Our results are robust to the ordering of private and public investment in the VAR.

As a viable mechanism for the public sector to crowding-in private capital in the delivery of public infrastructure projects, public-private partnerships (PPPs) can play a vital role in accelerating economic growth. Using a panel of five South Asian countries over 1990–2017, we compute macroeconomic rate of returns to evaluate the effects of an investment in PPPs through a panel vector autoregressive (PVAR) analysis with four variables: public investment, private investment, PPP investment and GDP. One of the defining features of infrastructure is its large upfront cost. The funding sources (user fees and taxes), however, materialize only after the facility is built – and then only slowly, over its lifecycle. Under the PPP mechanism, private partners finance the projects to bridge that gap. However, PPP is not a free lunch; eventually public pays for it either through user fees, taxes, or both, therefore causing interest rates to rise, leading to a crowding-out effect on investment. PPP investment, however, can create additional favorable conditions for private investment, for instance, by providing relevant infrastructure such as roads, highways, sewage systems, harbors or airports. These may increase the productivity of private investment, resulting in a crowding-in effect on private investment. Hence, the study also carries out an assessment of the crowding-in/crowding-out effects of PPP investment. The findings show that rates of return to public investment are positive, while returns to private investment are negative. Although the total rate of return to PPP investment is found to be positive, the magnitude is very small. Moreover, the partial rate of return to PPP investment is negative. Concerning crowding-in/crowding-out effects, an increase in PPP investment crowds-in both private and public investment, while public investment results in a crowding-out effect in both private and PPP investment. Lastly, private investment shows a crowding-in effect both in PPP investment and in public investment. Findings of the study have important policy implications for South Asian economies. In terms of both macroeconomic rate of return and crowding-in effect, South Asian countries need to promote the forms of PPP investment. They should formulate effective policies to encourage private investors to invest in PPP projects. To this end, governments should establish a legal framework and favorable conditions for this type of investment to develop and create an environment that help stimulate investment efficiency.

This paper examines the dynamic relationship between Private Domestic Investment (PDI), Foreign Direct Investment (FDI) and Public Investment (PU) in India for the period 1978–79 to 2009–10. Zivot and Andrews test has been used to know the structural break points in the data series. The empirical results derived from structural VAR model indicate that FDI has crowding in effects on PDI, whereas, PU neither ‘crowd out’ nor ‘crowd in’ PDI. Further, we found the evidence that shocks in PU and PDI have positively improved the FDI inflows in India.