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The Impact of Domestic Investment on Economic Growth New Policy Analysis from Algeria

Year 2018, Volume: 3 Issue: 1, 35 - 51, 30.03.2018
https://doi.org/10.25229/beta.337367

Abstract

This paper investigates the relationship between domestic investment and economic growth in Algeria. In order to achieve this purpose, annual data for the period between 1969 and 2015 was tested by using co integration analysis of Vector Error Correction Model. The equation of the long run relationship shows that domestic investment has a negative effect on economic growth. However, in the short run term, the Granger Causality Tests shows that domestic investment cause economic growth in Algeria. These results prove that domestic investment is a source of economic growth for Algeria, but unfortunately it suffers from several obstacles and problems that are directly related to the poor management and the weak strategy for development and investment, Lead to the appearance of this long-term negative effect, if it left in this situation.

References

  • Adams, S., Klobodu, E.K.M., and Lamptey, R.O. (2017). The Effects of Capital Flows on Economic Growth in Senegal. The Journal of Applied Economic Research 11 : 2 (2017): 1–22. Arrow, K.J. and Kurz, M. (1970), Public Investment, the Rate of Return and Optimal Fiscal Policy, Baltimore, MD: John Hopkins University Press; Aschauer, D.A. (1988), The Equilibrium Approach to Fiscal Policy, Journal of Money, Credit, and Banking, vol. 20, pp. 41-62 Aschauer D.A. and Greenwood, J. (1985). Macroeconomic Effects of Fiscal Policy, Carnegie Rochester Conference Series on Public Policy, vol. 23, pp. 91-138 Bakari, S. (2017). Appraisal of Trade: Potency on Economic Growth in Sudan: New Empirical and Policy Analysis. Asian Development Policy Review, vol. 5, No. 4, 213-225. Bakari, S (2017). The Long Run and Short Run Impacts of Exports on Economic Growth: Evidence from Gabon. The Economic Research Guardian. 7(1): 40-57. Bakari, S (2017). The Impact of Domestic Investment on Economic Growth: New Evidence from Malaysia. Journal of Smart Economic Growth, Vol. 2(2), pages 105-121. Bano, S., Ahmed, A., Zhao, Y. and Ejaz, H. (2017). The Effect of Human Capital Accumulation on Economic Growth. International Journal of Economics and Empirical Research. 5 (2), 61-72. Barro R.J., (1989) The neoclassical approach to fiscal policy, Modern Business Cycle Theory (ed. R.J.Barro), pp. 178-235, Cambridge MA.; Harvard University Press Barro R.J. (1990) Government Spending in a simple model of endogenous growth, Journal of Political Economy, vol. 98, pp-S103-25 Baxter, M. and King R.G. (1993) Fiscal Policy in general equilibrium, American Economic Review, vol.83, pp 315-34 David Alan Aschauer, 1989. "Public investment and productivity growth in the Group of Seven," Economic Perspectives, Federal Reserve Bank of Chicago, issue Sep, pages 17-25. Dickey, D. A. & W. A. Fuller (1979), “Distribution of Estimators of Autoregressive Time Series with a Unit Root,” Journal of the American Statistical Association, 74, 427-31. Dickey, D. A. & W. A. Fuller (1981) “Likelihood ratio Statistics for autoregressive time series with a unit root,” Econometrica, 49(4):1057-72. Engle, R. F. & Granger C. W. (1987), “Cointegration and Error Correction: Representation, Estimation and Testing,” Econometrica, 55, 251-276. Epaphra, M. and Mwakalasya, A.H. (2017) Analysis of Foreign Direct Investment, Agricultural Sector and Economic Growth in Tanzania. Modern Economy, 8, 111-140. http://dx.doi.org/10.4236/me.2017.81008 Futagami, K.Y., Morita Y and Shibata A. (1993) Dynamic Analysis of an endogenous growth model with public capital, Scandinavian Journal of Economics, vol.95, pp.607-25 Granger, C. (1969). Investigating Causal Relations by Econometric Models: Cross Spectral Methods. Econometrica, vol. 37, pp. 424-38. Johansen, S. (1988), “Statistical Analysis of Cointegration Vectors,” Journal of Economic Dynamics and Control, 12, 231-54. Mbulawa, S. (2017). The Impact of Economic Infrastructure on Long Term Economic Growth in Botswana. Journal of Smart Economic Growth. Volume 2, Number 1, Year 2017. Menegaki, A.K, and Tugcu, C.T (2017). Energy Consumption and Sustainable Economic Welfare in G7 Countries; A Comparison with the Conventional Nexus. Renewable and Sustainable Energy Reviews 69 (2017) 892–901. Phillips, P. C. B. & Perron, P. (1988), “Testing for a Unit Root in Time Series Regression,” Biometrika, 75(2), 335-46. Turnovsky, S.J. (1995) Methods of Macroeconomic Dynamics, Cambridge, MA; MIT Press. Sapkota, P and Bastola, U. (2017). Foreign Direct Investment, Income, and Environmental Pollution in Developing Countries: Panel Data Analysis of Latin America. Energy Economics. Volume 64, May 2017, Pages 206-212. Sarwar, S. Chen, W and Waheed, R. (2017). Electricity Consumption, Oil Price and Economic Growth: Global Prespective. Renewable and Sustainable Energy Reviews. 76 (2017) 9 – 18. Siddique, H. M. A., Ullah, K. and Haq, I. U. (2017). External Debt and Economic Growth Nexus in Pakistan. International Journal of Economics and Empirical Research. 5 (2), 73-77.
Year 2018, Volume: 3 Issue: 1, 35 - 51, 30.03.2018
https://doi.org/10.25229/beta.337367

Abstract

References

  • Adams, S., Klobodu, E.K.M., and Lamptey, R.O. (2017). The Effects of Capital Flows on Economic Growth in Senegal. The Journal of Applied Economic Research 11 : 2 (2017): 1–22. Arrow, K.J. and Kurz, M. (1970), Public Investment, the Rate of Return and Optimal Fiscal Policy, Baltimore, MD: John Hopkins University Press; Aschauer, D.A. (1988), The Equilibrium Approach to Fiscal Policy, Journal of Money, Credit, and Banking, vol. 20, pp. 41-62 Aschauer D.A. and Greenwood, J. (1985). Macroeconomic Effects of Fiscal Policy, Carnegie Rochester Conference Series on Public Policy, vol. 23, pp. 91-138 Bakari, S. (2017). Appraisal of Trade: Potency on Economic Growth in Sudan: New Empirical and Policy Analysis. Asian Development Policy Review, vol. 5, No. 4, 213-225. Bakari, S (2017). The Long Run and Short Run Impacts of Exports on Economic Growth: Evidence from Gabon. The Economic Research Guardian. 7(1): 40-57. Bakari, S (2017). The Impact of Domestic Investment on Economic Growth: New Evidence from Malaysia. Journal of Smart Economic Growth, Vol. 2(2), pages 105-121. Bano, S., Ahmed, A., Zhao, Y. and Ejaz, H. (2017). The Effect of Human Capital Accumulation on Economic Growth. International Journal of Economics and Empirical Research. 5 (2), 61-72. Barro R.J., (1989) The neoclassical approach to fiscal policy, Modern Business Cycle Theory (ed. R.J.Barro), pp. 178-235, Cambridge MA.; Harvard University Press Barro R.J. (1990) Government Spending in a simple model of endogenous growth, Journal of Political Economy, vol. 98, pp-S103-25 Baxter, M. and King R.G. (1993) Fiscal Policy in general equilibrium, American Economic Review, vol.83, pp 315-34 David Alan Aschauer, 1989. "Public investment and productivity growth in the Group of Seven," Economic Perspectives, Federal Reserve Bank of Chicago, issue Sep, pages 17-25. Dickey, D. A. & W. A. Fuller (1979), “Distribution of Estimators of Autoregressive Time Series with a Unit Root,” Journal of the American Statistical Association, 74, 427-31. Dickey, D. A. & W. A. Fuller (1981) “Likelihood ratio Statistics for autoregressive time series with a unit root,” Econometrica, 49(4):1057-72. Engle, R. F. & Granger C. W. (1987), “Cointegration and Error Correction: Representation, Estimation and Testing,” Econometrica, 55, 251-276. Epaphra, M. and Mwakalasya, A.H. (2017) Analysis of Foreign Direct Investment, Agricultural Sector and Economic Growth in Tanzania. Modern Economy, 8, 111-140. http://dx.doi.org/10.4236/me.2017.81008 Futagami, K.Y., Morita Y and Shibata A. (1993) Dynamic Analysis of an endogenous growth model with public capital, Scandinavian Journal of Economics, vol.95, pp.607-25 Granger, C. (1969). Investigating Causal Relations by Econometric Models: Cross Spectral Methods. Econometrica, vol. 37, pp. 424-38. Johansen, S. (1988), “Statistical Analysis of Cointegration Vectors,” Journal of Economic Dynamics and Control, 12, 231-54. Mbulawa, S. (2017). The Impact of Economic Infrastructure on Long Term Economic Growth in Botswana. Journal of Smart Economic Growth. Volume 2, Number 1, Year 2017. Menegaki, A.K, and Tugcu, C.T (2017). Energy Consumption and Sustainable Economic Welfare in G7 Countries; A Comparison with the Conventional Nexus. Renewable and Sustainable Energy Reviews 69 (2017) 892–901. Phillips, P. C. B. & Perron, P. (1988), “Testing for a Unit Root in Time Series Regression,” Biometrika, 75(2), 335-46. Turnovsky, S.J. (1995) Methods of Macroeconomic Dynamics, Cambridge, MA; MIT Press. Sapkota, P and Bastola, U. (2017). Foreign Direct Investment, Income, and Environmental Pollution in Developing Countries: Panel Data Analysis of Latin America. Energy Economics. Volume 64, May 2017, Pages 206-212. Sarwar, S. Chen, W and Waheed, R. (2017). Electricity Consumption, Oil Price and Economic Growth: Global Prespective. Renewable and Sustainable Energy Reviews. 76 (2017) 9 – 18. Siddique, H. M. A., Ullah, K. and Haq, I. U. (2017). External Debt and Economic Growth Nexus in Pakistan. International Journal of Economics and Empirical Research. 5 (2), 73-77.
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Details

Primary Language English
Subjects Business Administration
Journal Section x
Authors

Sayef Bakari

Publication Date March 30, 2018
Submission Date September 9, 2017
Acceptance Date September 26, 2018
Published in Issue Year 2018 Volume: 3 Issue: 1

Cite

APA Bakari, S. (2018). The Impact of Domestic Investment on Economic Growth New Policy Analysis from Algeria. Bulletin of Economic Theory and Analysis, 3(1), 35-51. https://doi.org/10.25229/beta.337367

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