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Article
Publication date: 1 February 1997

Mohammad Zebib and Michael Muoghalu

This paper suggests that private investment expenditure is determined by the changes in domestic credit and net capital inflow to the private sector. Any increase in…

Abstract

This paper suggests that private investment expenditure is determined by the changes in domestic credit and net capital inflow to the private sector. Any increase in government investment increases private investment through the increase in the changes in private output (contributory effect) and decreases private investment through the decrease in the availability of the banking system's domestic credit and net inflow of capital to the private sector.

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Studies in Economics and Finance, vol. 18 no. 1
Type: Research Article
ISSN: 1086-7376

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Article
Publication date: 1 December 2020

Robert L. Sichel, William P. Wade, Ruth E. Delaney, Kristina M. Zanotti and Michael McGrath

To explain recent regulatory guidance for different types of stakeholders, including asset managers, fund complexes, and institutional investors.

Abstract

Purpose

To explain recent regulatory guidance for different types of stakeholders, including asset managers, fund complexes, and institutional investors.

Design/methodology/approach

Summary of recent regulatory guidance and explanation for different types of stakeholders, including asset managers, fund complexes, and institutional investors.

Findings

While the U.S. Department of Labor’s (DOL’s) letter does not open the door to direct access to Private Market Investments by 401(k) plan participants, it does provide a framework for the expanded use of private equity and, we believe, other types of Private Market Investments in managed asset allocation funds such as target date funds.

Originality/value

Practical guidance from experienced asset management and investment funds and ERISA lawyers.

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Journal of Investment Compliance, vol. 21 no. 2/3
Type: Research Article
ISSN: 1528-5812

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Article
Publication date: 30 July 2020

Opeoluwa Adeniyi Adeosun, Monica Adele Orisadare, Fisayo Fagbemi and Sikiru Adetona Adedokun

This study explores the asymmetric linkage between public investment and private sector performance in Nigeria. This is due to the presence of nonlinear structures in the…

Abstract

Purpose

This study explores the asymmetric linkage between public investment and private sector performance in Nigeria. This is due to the presence of nonlinear structures in the behavior of domestic investment series with evidences of structural time breaks, which fall within periods of global financial crises and oil shocks.

Design/methodology/approach

Main data on gross capital formation, gross fixed capital formation, domestic credit to private sector, domestic credit to private sector by banks are used for the study span through 1986 to 2017. Evidence of asymmetry spurs the study to adopt the nonlinear autoregressive distributed lag, asymmetric generalized impulse response and variance decomposition and asymmetric granger causality techniques.

Findings

It is shown that positive (negative) investment shocks exhibit a non-negligible and substantial stimulating (dampening) influence on the long-run performance of private sector in the economy. However, there is evidence that negative investment shocks portend a positive influence on the performance of private sector in the short run. This suggests that negative shocks to investment may not dampen the effectiveness of private sector in the short run, and this thus brings to bear the debate on the tenability of public investment as a potent counter cyclical tool in enhancing short-run private sector growth. The nonlinear granger causality also shows a unidirectional nonlinear causality from public investment to private sector performance. However, there is no evidence of bidirectional nonlinear causality.

Originality/value

This study provides quantitative evidence that Nigeria still depends exclusively on public investment, and as an oil-based rentier economy its economic diversification drive still remains bleak.

Details

International Journal of Emerging Markets, vol. 16 no. 8
Type: Research Article
ISSN: 1746-8809

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Article
Publication date: 14 September 2012

Magda Kandil

The purpose of this paper is to study the role of public and private imbalances in the cyclicality of the current account balance in a sample of advanced and developing…

Abstract

Purpose

The purpose of this paper is to study the role of public and private imbalances in the cyclicality of the current account balance in a sample of advanced and developing countries. Within developing countries, the evidence does not establish the dependency of private investment on private savings and private consumption is the main driver of the saving/investment balance. In contrast, private savings seem to be better mobilized to finance private investment and the latter is the main driver of the saving/investment balance in advanced countries. Deterioration in the current account balance in response to higher private consumption could be detrimental to growth and external stability. In contrast, an investment strategy that promotes growth is likely to attract financial flows and reduce the risk of a widening current account deficit on external stability.

Design/methodology/approach

The paper studies determinants of the current account deficit. It studies current account fluctuations in the short‐run and explains these fluctuations by analyzing movements in the underlying components: public and private savings as well as investments and resulting imbalances. Of particular interest is the interaction between the government budget deficit, the private saving/investment balance, and the current account balance.

Findings

Using time‐series estimates, co‐movements indicate that fluctuations in the current account balance in many advanced countries appear to be driven by private investment that determines cyclicality in imports. In contrast, cyclicality in the current account appears to be driven by private consumption that determines fluctuations in imports in many developing countries. In general, fluctuations in the government budget deficit are mostly driven by government investment and fluctuations in the private saving/investment balance are mostly driven by fluctuations in private investment. Further, fluctuations in the current account balance appear to be mostly driven by fluctuations in the private saving/investment balance.

Originality/value

The paper explains the dynamics of the current account in relation to developments in public and private imbalances and its underlying components. It shows the effects of changes in the budget deficit and its underlying components on cyclicality in the current account. Similarly, cyclicality in the current account balance with cyclical movements in private savings and investment is studied, along with which factors affect the components of the current account balance. In particular, the paper establishes which components of the current account significantly respond to the cyclical changes in macroeconomic variables.

Details

International Journal of Development Issues, vol. 11 no. 3
Type: Research Article
ISSN: 1446-8956

Keywords

Open Access
Article
Publication date: 6 June 2018

Canh Thi Nguyen and Lua Thi Trinh

The purpose of this paper is to assess both short and long-term influences of public investment on economic growth and test the hypothesis that whether public investment

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Abstract

Purpose

The purpose of this paper is to assess both short and long-term influences of public investment on economic growth and test the hypothesis that whether public investment promotes or demotes private investment in Vietnam.

Design/methodology/approach

The authors use the approach of autoregressive distributed lag model and Vietnam’s macro data in the period of 1990-2016, to evaluate the short and long-term effects of public investment on economic growth and private investment. The model evaluates the impact of public investment on economic growth and private investment based on the neoclassical theories. The public investment which strongly affects economic growth is also reflected by aggregate supply and demand. Public investment directly impacts aggregate demand as a government expenditure and aggregate supply as a production function (capital factor).

Findings

The results from this research indicate that public investment in Vietnam in the past period does affect economic growth in the pattern of an inverted-U shape as of Barro (1990), with positive effects mostly occurring from the second year and negative effects of constraining long-term growth. Meanwhile, investment from the private sector, state-owned enterprises, and FDI has positive effects on short-term economic growth and state-owned capital stock has positive impacts on economic growth in both the short and long run. The estimated influence of public investment on private investment also shows a similar inverted-U shape in which public investment have crowding-in private investment short-term but crowding-out in the long run.

Practical implications

The empirical findings in this study can be used for conducting a more efficient policy in restructuring the state sector investment in Vietnam.

Originality/value

The main contributions in this study are: to evaluate the impacts of public investment on economic growth and private investment, the authors extracted public investment in infrastructure from aggregate investment of state sector (as previous studies used); the authors also uses state-owned capital stock variable including cumulative public investment and state-owned enterprises investment suggesting that this could control for the different orders of integration between the stock and flow variable and improve the experimental characteristics of the equation to a higher degree.

Details

Journal of Asian Business and Economic Studies, vol. 25 no. 1
Type: Research Article
ISSN: 2515-964X

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Article
Publication date: 3 April 2017

Shanmugam Muthu

The purpose of this paper is to examine the crowding-in or crowding-out relationship between public and private investment in India.

Abstract

Purpose

The purpose of this paper is to examine the crowding-in or crowding-out relationship between public and private investment in India.

Design/methodology/approach

The autoregressive distributed lag (ARDL) bounds testing approach is used to estimate the long run relationship between public and private investment using annual data from 1971-1972 to 2009-2010.

Findings

Based on the empirical findings, it is observed that aggregate public investment has a positive effect on private investment both in the long run and the short run. In contrast to the findings of previous studies, no significant impact of public infrastructure investment on private investments is found in the long run, while non-infrastructure investment has a positive impact on private investment in the short run. Among the various categories of infrastructure sector, a positive and significant impact in the case of electricity, gas and water supply is observed. Similarly, the result indicates that public investment in machinery and equipment and construction have substantially influenced the private sector machinery and equipment in the long run and the short run. In the case of the role of macroeconomic uncertainty, the results find a negative and significant impact on private investment and the impact is higher in the short run than in the long run.

Originality/value

The present study extends the literature in three important ways: First, the study attempts to capture heterogeneity of public investment as well as disaggregate effects of two different categories of public infrastructure on private investment. The extent to which two different types of public assets impact the private investment in machinery and equipment investment is also examined. Second, ARDL model is used to examine the long-run relationship between public and private investment. Third, the study incorporates macroeconomic uncertainty into the empirical analysis to examine the role of macroeconomic volatility in determining private investment decision.

Details

Journal of Financial Economic Policy, vol. 9 no. 1
Type: Research Article
ISSN: 1757-6385

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Article
Publication date: 1 April 1999

Robert E. Looney

The cornerstone of the government’s adjustment program is to increase the efficiency of private investment and activity by deregulating the economy and promoting…

Abstract

The cornerstone of the government’s adjustment program is to increase the efficiency of private investment and activity by deregulating the economy and promoting competition. The counterpart of this fundamental strategy is the need to increase the effectiveness of the public sector which in Pakistan had become overextended. To this end, public sector resources and management capacity are being redirected and concentrated in those areas in which public sector intervention is required because of market failures or social objectives. The results obtained strongly suggest that the government’s program is supported by strong empirical evidence. There is no question that private investment has been discouraged by the public capital formation in manufacturing. Not only has government investment in this area stifled the private sector, but also it has diverted funds away from productive activities that would most likely have encouraged a follow‐on expansion in private investment.

Details

International Journal of Social Economics, vol. 26 no. 4
Type: Research Article
ISSN: 0306-8293

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Article
Publication date: 4 January 2022

Evans Kulu, William Gabriel Brafu-Insaidoo, James Atta Peprah and Eric Amoo Bondzie

This study investigates the effect of government domestic payment arrears on private investment. The authors argue that an increase in government domestic arrears can…

Abstract

Purpose

This study investigates the effect of government domestic payment arrears on private investment. The authors argue that an increase in government domestic arrears can reduce private sector investment owing to the competition for credit.

Design/methodology/approach

The prediction is empirically tested using data for 33 Sub-Saharan Africa (SSA) countries for the period 2007–2018 using a panel general methods of moment estimation technique. This is also complemented with impulse responses derived from the standard vector autoregressive model.

Findings

The results show that an increase in government domestic arrears adversely affects private investment in SSA and most subregional communities within SSA. It also revealed that private investment negatively responds to shocks in government domestic arrears.

Originality/value

This is the first study that attempts to investigate the effect of government domestic borrowing arrears on private investment. It seeks to serve as a guide to governments in their domestic borrowing decisions to ensure timely servicing.

Details

African Journal of Economic and Management Studies, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 2040-0705

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Article
Publication date: 28 July 2020

Van Bon Nguyen

The paper attempts to empirically examine the difference in the foreign direct investment (FDI) – private investment relationship between developed and developing…

Abstract

Purpose

The paper attempts to empirically examine the difference in the foreign direct investment (FDI) – private investment relationship between developed and developing countries over the period 2000–2013.

Design/methodology/approach

The paper uses the two-step GMM Arellano-Bond estimators (both system and difference) for a group of 25 developed countries and a group of 72 developing ones. Then, the PMG estimator is employed to check the robustness of estimates.

Findings

First, there is a clear difference in the FDI – private investment relationship between developed countries and developing ones. Second, governance environment, economic growth and trade openness stimulate private investment. Third, the effect of tax revenue on private investment in developed countries is completely opposite to that in developing ones.

Originality/value

The paper is the first to provide empirical evidence to confirm the dependence of FDI – private investment relationship on governance environment. In fact, contrary to the view (arguments) in Morrissey and Udomkerdmongkol (2012), the paper indicates that FDI crowds out private investment in developed countries (good governance environment), but crowds in developing countries (poor governance environment).

Details

Journal of Economic Studies, vol. 48 no. 4
Type: Research Article
ISSN: 0144-3585

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Article
Publication date: 6 March 2019

Daniel Huerta and Mark Pyles

The purpose of this paper is to describe an investment program that offers students with the opportunity to simultaneously manage a private asset fund and a public asset…

Abstract

Purpose

The purpose of this paper is to describe an investment program that offers students with the opportunity to simultaneously manage a private asset fund and a public asset fund. The program has been in operation since 2013 and has made significant progress in student placement and connectivity with local, regional and national financial firms.

Design/methodology/approach

The authors describe the structure, methods used and challenges encountered in this dual portfolio environment and add relevant thoughts for discussion. The authors discuss potential conflicts of interests that may arise in managing a private equity portfolio, the concern of proper deal flow, the issue of the investment timeline when investing in private equity and the problems encountered when measuring private equity performance.

Findings

While public asset funds have been around for decades and are relatively well accepted throughout all levels and types of higher education institutions. The uses of private equity funds, though not unheard of, are much less prevalent. Allowing the same group of students to manage both type of portfolios is relatively unique and provides with a more comprehensive learning experience.

Originality/value

A primary distinguishing attribute of this program is that accepted students are given the opportunity to simultaneously manage both public and private equity assets throughout an academic year. The goal is to create a comprehensive portfolio management program that replicates a changing investment management environment where private equity is an increasingly significant asset class.

Details

Managerial Finance, vol. 46 no. 5
Type: Research Article
ISSN: 0307-4358

Keywords

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