The Determinants of Private Investment

Abstract

Key point of this article is to explore the determinants of private investment in the context of the Pakistan for the era of the 1991 to 2018.Time series data is collected from the International Financial Statistics (IFS), World Bank and different issues of Pakistan Economic Survey. By using the different econometric techniques such as Descriptive Statistics, Correlation Metrix, LM Test, Heteroskedacity Test and Ordinary Least Square (OLS) analysis outcomes of the study are obtained. In this study dependent variable is Private Investment (PRI) while the other variables such as Public Investment (PBI), Gross Domestic Product (GDP), Interest Rate (IR), External Debt Service (EDS), Foreign Direct Investment (FDI) are independent variables. OLS results show that PBI, GDP and FDI are statistically significant and have positive impact on the PRI. Interest Rate (IR) and External Debt Service (EDS) is statistically insignificant that indicate it is not taking part in the growth of the Private Investment (PRI). The study results suggest that public investment would be used on the economic and social infrastructure such as roads, health and education services that directly affect the private sector.