Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/188151 
Year of Publication: 
2014
Citation: 
[Journal:] Pakistan Journal of Commerce and Social Sciences (PJCSS) [ISSN:] 2309-8619 [Volume:] 8 [Issue:] 2 [Publisher:] Johar Education Society, Pakistan (JESPK) [Place:] Lahore [Year:] 2014 [Pages:] 485-501
Publisher: 
Johar Education Society, Pakistan (JESPK), Lahore
Abstract: 
The current study examines the relationship between GDP fluctuations and private investment by using macro panel approach in a panel of five selected South Asian countries (SSAC) including Bangladesh, India, Nepal, Pakistan and Sri Lanka for the period of 1980-2010. The study applies modern non-stationary panel techniques such as cross section dependence test, unit root test under cross sectional dependence, panel cointegration and Group Mean Fully Modified OLS (GM-FMOLS) estimation. The study finds a long-run co-integrating relationship between GDP fluctuations and private investment in the SSAC. GM-FMOLS estimates show that this link is negative. Thus, the results indicate that GDP fluctuations have a significant negative impact on private investment in SSAC as GDP volatility gives a negative signal to private investors. The study also suggests that GDP volatility may be harmful for private investment in developing countries and negative effect on private investment will also be transferred to growth as the investment is a key determinant of growth. So, the governments of developing countries should equally focus on managing the volatility of GDP to increase private investment along with other measures for creating an investment-friendly environment. Additionally, an increase in private investment will further help in maintenance of stability.
Subjects: 
GDP volatility
GDP fluctuations
private investment
uncertainty
south Asia
group mean FMOLS
panel co-integration
macro panel
Creative Commons License: 
cc-by-nc Logo
Document Type: 
Article

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