Do fiscal measures stimulate private investment in Africa

Abstract

Abstract. The study inspects the effect of fiscal measures on private investment in Selected African countries between 1980-2016.The study adopts Panel Autoregressive Distributed Lag (PARDL) Bounds testing approach develop by Pesaran, Shin & Smith (2001) in estimating the relevant relationship. The results of the long run estimates show that show that interest on debt payment, government expenditure, expected inflation, exchange rate and government tax revenue, all have positive relation with private Iivestment among five selected African countries, suggesting that fiscal measures have crowd in effects on private investment in the long run. While, the results of the short run dynamics show that change in the previous one lagged periods of the variables negative impacts on private investment, whereas the lagged two of the variables shows positive impacts on private investment in the short run, suggesting that there is a crowd out fiscal measures crowd out private investment in among the five selected African countries. The study recommends that the policy makers need to ensure fiscal discipline, if private investment must survive in African. Keywords. Fiscal Measures, Private investment, Africa, Exchange rate. JEL. H30, E20, E65.