Econometric Study of the Impact of Public and Private Investment on Economic Growth in Algeria during the Period (1970-2017)

Main Article Content

Hadjoudj Abdallah
TchiKo Faouzi

Abstract

This article examines the impact of public and private investment on economic growth in Algeria covering the period from 1970 to 2017. By applying the Auto-Regressive Distributed Lag model (ARDL)-(bounds testing approach).

The key findings of the study concluded that there is a long-run relationship between public and private investment and economic growth in Algeria.

The result of the Augmented Dickey Fuller unit root test (ADF) showed that the variables are stationary at the level and at the first difference. In addition, the results of the cointegration test indicated that the variables are cointegrated and therefore have the ability to move together over the long term.

The parsimonious error correction mechanism showed that private investment is significantly related to economic growth. The result indicated that a 1 percent increase in the present value of private investment, on average, stimulates economic growth by 0.09 percent. Similarly, the value of public investment is positively related to economic growth. On average, a 1 percent increase in public investment stimulates growth in Algeria by 0.05 percent.

the results of short-run dynamics reveal that, the error correction term (ECM) is negative and significant (-0.54), which means that 54% of the disequilibrium will be adjusted annually.

Keywords:
Economic growth, public investment, private investment, ARDL model, Algeria.

Article Details

How to Cite
Abdallah, H., & Faouzi, T. (2020). Econometric Study of the Impact of Public and Private Investment on Economic Growth in Algeria during the Period (1970-2017). Asian Journal of Economics, Business and Accounting, 18(2), 58-69. https://doi.org/10.9734/ajeba/2020/v18i230282
Section
Original Research Article

References

Palloix C. Industrialisation et financement lors des deux plans quadriennaux (1970-1977). Tiers Monde 1980;21(83):531–55.: french

Banque.Mondiale. Algerie Le Plan de Developpement 1985-1989et les Perspectives a Moyen et Long Terme; 1989.

Arrow KJ, Kurz M. Public Investment , the Rate of Return , and Optimal Fiscal Policy. The Johns Hopkins University Press for Resources for the Future; 1970.

Pradel P. L’épargne et l’investissement. In: Presses Universitaires de France [Internet]; 1961.french

Gaffard J-L. Capital richesse et croissance. De la recherche empirique aux éclairages théoriques More features. Rev l’OFCE, Press Sci. 2015;0(1):57–82.

Khan MS, Kumar MS. public and private investment and the growth process in developing counries. Oxf Bull Econ Stat. 1997;1(59):69–88.

HERRERA R. Infrastructures, capital public et croissance. EcoFlash Mens d’informations économiques Soc CNDP ⟨hal-00822274⟩2012;1–6. french.

Erenburg SJ. The real effect of public investment on private investment,. Appl Econ. 1993;25:831–7.

Khan MS, Reinhart CM. Private investment and economic growth in developing countries. World Dev. 1990;18(1):19–27.

Odedokun M. Relative effect of public versus private investment spending on economic efficiency and growth in developing Countries Applied Economics. 2006;29(1997).

Erum N, Hussain S, Yousaf A. Foreign direct investment and economic growth in Saarc countries.e. J Asian Financ Econ Business. 2016;3–4:57–66.

Zekane A. Le rôle des infrastructures dans la croissance de l’économie algérienne : essai d’analyse économétrique. Rev des Sci Commer Gest École Supérieure Commer d’Alger(3) 2004. french

Nguyen CT, Trinh LT. The impacts of public investment on private investment and economic growth. J Asian Bus Econ Stud. 2018;25(1):15–32.

Barro RJ. Government Spending in a Simple Model of Endogeneous Growth. J Polit Econ. 1990;98(5, Part 2):S103–25.

Benabdallah Y. Le développement des infrastructures en Algérie : quels effets sur la croissance économique et l‟environnement de l‟investissement ? In 2009;1–25.

Bouyacoub A. Quel développement économique depuis 50 ans ? In L’Harmattan | « Confluences Méditerranée »; 2012;83–102.

Abdelkader B, Cheikh S, Sofiane M. The impact of the public expenditure on employment and income in Algeria : An Empirical Investigation. 2017;7(3):155–61.

Embassy,of,Algeria Londn. the public investment programme; 2010-2014 [Internet].Available: Avialable:http://www.algerianembassy.org.uk/index.php/algerian-economy/99-the-2010-2014-public-investment-programme.html

Economic commission for Africa UN. Structural transformation, employment, production and society; 2019. Available: www.uneca.org/publications

Boukaraoun H. the privatiztion procesess in algeria. Dev Econ; 1991. Available from: j.1746-1049.1991.tb00202.x.pdf

Pwt. www.ggdc.net/pwt. 2019 [cited 2020 Mar 10Available: www.ggdc.net/pwt

IMF. Investment and Capital Stock Dataset, 1960-2017 [Internet]. imf; 2019. Available: http://www.imf.org

National, Agency, of investment D. 2000-2013: Algeria’s economic indicators sustained [Internet].Available:http://www.andi.dz/index.php/en/presse/1034-2000-2013-algeria-s-economic-indicators-sustained

Solow RM. A Contribution to the Theory of Economic Growth. Q J Econ. 1956;70(1):65–94.

Pesaran MH, Shin Y, Smith R. Bounds testing approaches to the analysis of level relationships. J Appl Econom. 2001;16:289–326.

Pesaran, M.H. et Pesaran B. Working with microfit 4.0 : Interactive econometric analysis. Oxford, Oxford Univ Press; 1997.

Fond Monétaire International. Consultations De 2015 Au Titre De L’Article Iv - Communiqué De Presse Et Rapport Des Services Du Fmi. 2016;(202):64. Available: www.imf.org