Istituto di Economia Internazionale - The Relative Effects of Public and Private Capital on Guyana’s Economic Performance, 1980 to 2018: A Cointegration Analysis

Recent Articles

Read more about our latest published articles.

Review’s Archive

Corresponding Author:
Nelson Modeste, College of Business, Tennessee State University, Nashville, Tennessee, USA

The Relative Effects of Public and Private Capital on Guyana’s Economic Performance, 1980 to 2018: A Cointegration Analysis

February 15, 2023
JEL classification: E22; E23; O11; O54
Keywords: Guyana; Public Capital; Private Capital; Economic Growth; Sources of Economic Growth; Autoregressive Distributed Lag Model; Bounds Testing Approach

Abstract

Using data from Guyana for the period 1980-2018, this paper examines two issues. The first issue studied in the paper is the relative effects of public and private capital on Guyana’s economic performance. The second issue investigated is the sources of output growth for the economy. To examine the first issue, a Cobb-Douglas production function, expressed in the form of a conditional autoregressive distributed lag equation, is applied. While for the second issue, a growth accounting expression is used.

Two key empirical results emerge from this study. The first is that public capital has exerted, on the country’s economic growth, a greater impact than private capital. Notwithstanding this finding, the second key result is that both public and private capital are found to be statistically significant in growing the economy over the long run. Given these results, a major implication arising from the empirical analysis in this study is the need for expansion in both public and private capital to facilitate the growth of the economy, over the long run.

Read the full article

Download the article in PDF format to read and print.

Bibliography

Aka, B.F. (2007), “Relative Effects of Public and Private Investment on Cote d’Ivoire Economic Performance”, Applied Econometrics and International Development, 7(1), 151-158.

Aschauer, D.A. (1989), “Is Public Expenditure Productive?”, Journal of Monetary Economics, 23(2), 177-200.

Aubyn, M. and A. Afonso (2008), “Macroeconomic Rates of Return of Public and Private Investment: Crowding-In and Crowding-Out Effects”, ECB Working Paper No. 864.

Bank of Guyana (2018), Annual Report, Georgetown: Guyana.

Beddies, C.H. (1999), “Investment, Capital Accumulation, and Growth: Some Evidence from the Gambia 1964-98”, IMF Working Paper No. 117.

Belloc, M. and P. Vertova, (2004), “How Does Public Investment Affect Economic Growth in HIPC? An Empirical Assessment”, Quaderni No. 416 January, Department of Economics, University of Siena.

Coutinho, R. and G. Gallo (1991), “Do Public and Private Investment Stand in Each other’s Way?”, World Development Report Background Paper, World Bank.

Egoumé-Bossogo, P., E. Faal, R. Nallari and E. Weisman (2003), Guyana: Experience with Macroeconomic Stabilization, Structural Adjustment, and Poverty Reduction, International Monetary Fund Special Issues: Washington, DC.

Engle, R.F. and C.W.J. Granger (1987), “Co-Integration and Error Correction: Representation, Estimation, and Testing”, Econometrica, 55(2),251-276.

Erden, L. and R. Holcombe (2005), “The Effects of Public Investment on Private Investment in Developing Economies”, Public Finance Review, 33(5), 575-602.

Ghali, K. (1998), “Public investment and private capital formation in a vector error-correction model of growth”, Applied Economics, 30(6),837-844.

Ghura, D. (1997), “Private Investment and Endogenous Growth: Evidence from Cameroon”, IMF Working Paper No. 165.

Haque, S.T. (2013), “Effect of Public and Private Investment on Economic Growth in Bangladesh: An Econometric Analysis”, Research Study Series No.FDRS05/2013, Finance Division, Ministry of Finance.

Harberger, A. (1978), Perspectives on Capital and Technology in less Developed Countries, in: M.J. Aris, A.R. Nobay (Eds), “Contemporary Economic Analysis”, Croom Helm: London.

IMF (2019), World Economic Outlook Databases, International Monetary Fund, <https://www.imf.org/en/Publications/SPROLLs/world-economic-outlook-databases#sort=%40imfdate%20descending>.

Johansen, S. and K. Juselius, (1990), “Maximum Likelihood Estimation and Inference on Cointegration - with Applications to the Demand for Money”, Oxford Bulletin of Economics and Statistics, 52(2), 169-210.

Khan, M.S. and M.S. Kumar (1997), “Public and Private Investment and the Growth Process in Developing Countries”, Oxford Bulletin of Economics and Statistics, 59(1), 69-88.

Khan, M.S. and C.M. Reinhart (1990), “Private Investment and Economic Growth in Developing Countries”, World Development, 18(1), 19-27.

Ligthart, J.E. (2002), “Public Capital and Output Growth in Portugal: An Empirical Analysis”. Quarterly Review of Economics and Finance, 1(2), 3-30.

Makuyana, G. and N.M. Odhiambo (2016), “Public and Private Investment and Economic Growth: A Review”, Journal of Accounting and Management, 06(02), 25-42.

Makuyana, G. and N.M. Odhiambo (2018), “Public and Private Investment and Economic Growth in Zambia: A Dynamic Approach”, Economia Internazionale/International Economics, 71(4), 503-526.

Mallick, S.K. (2002), “Determinants of Long-Term Growth in India: A Keynesian Approach”, Progress in Development Studies, 2(4)306-324.

Munnell, A. (1990), “Why has Productivity Growth Declined? Productivity and Public Investment”, Federal Reserve Bank of Boston, New England Economic Review, January/February, 3-20.

Narayan, P.K. (2005), “The Saving and Investment Nexus for China: Evidence from Cointegration Tests”, Applied Economics, 37(17), 1979-1990.

Nazmi, N. and M.D. Ramirez (1997), “Public and Private Investment and Economic Growth in Mexico”, Contemporary Economic Policy, 15(1), 65-75.

Nehru, V. and A. Dhareshwar, (1993), “A New Database on Physical Capital Stock: Sources, Methodology and Results”, Revista de Análisis Económico, 8(1), 37-59.

Odedokun, M.O. (1997), “Relative Effects of Public versus Private Investment Spending on Economic Efficiency and Growth in Developing Countries”, Applied Economics, 29(10), 1325-1336.

Pesaran, M.H. and Y. Shin (1999), An Autoregressive Distributed Lag Modeling Approach to Cointegration Analysis, in: S. Strøm (Ed.), “Econometrics and Economic Theory in the 20th Century”, Chapter 11, The Ragnar Frisch Centennial Symposium, Cambridge University Press: Cambridge.

Pesaran, M.H., Y. Shin and R. J. Smith (2001) “Bounds Testing Approaches to the Analysis of Level Relationships”, Journal of Applied Econometrics, 16(3), 289-326.

Ramirez, M.D. (1996), “Public and Private Investment in Mexico and Chile: An Empirical Test of the Complementarity Hypothesis”, Atlantic Economic Journal, 24(4), 301-320.

Ramirez, M.D. and N. Nazmi (2003), “Public Investment and Economic Growth in Latin America: An Empirical Test”, Review of Development Economics, 7(1), 115-126.

Sahoo, P., R.K. Dash and G. Nataraj (2010), “Infrastructure Development and Economic Growth in China”, IDE Discussion Papers 261, Institute of Developing Economies, Japan External Trade Organization (JETRO).

Serven, L. and A. Solimano (1992), “Private Investment and Macroeconomic Adjustment: A Survey”, The World Bank Research Observer, 7(1), 95-114.

Sturm, J-E., G.H. Kuper and J. de Haan, (1996), “Modeling Government Investment and Economic Growth at the Macro Level: A Review”, CCSO Series No. 29,Department of Economics, University of Groningen.

UNSD (2019), National Accounts Data, United Nations Statistics Division, <https://unstats.un.org/unsd/nationalaccount/data.asp> .

World Bank (2018), Worldwide Governance indicators, <https://info.worldbank.org/governance/wgi/>.

Zou, Y. (2006), “Empirical Studies on the Relationship between Public and Private Investment and GDP Growth”, Applied Economics, 38(11) 1259-1270.

Recent Articles

Review’s Archive

The Relative Effects of Public and Private Capital on Guyana’s Economic Performance, 1980 to 2018: A Cointegration Analysis

Abstract

Read the full article

Bibliography

Register your account

Authors’ login

Institute for International Economics of the Genoa Chamber of Commerce

Institute for International Economics
of the Genoa Chamber of Commerce