The Causal Relationship between Private and Public Investment in Zimbabwe
Brian Muyambiri
Botswana College of Distance and Open Learning (BOCODOL), P/Bag BO 187, Bontleng, Gaborone, Botswana.
Oscar Chiwira *
Centre for Research, Entrepreneurship and Project Management, BA ISAGO University College, Private Bag 149, Suite #268, Kgale View PostNet, Gaborone, Botswana.
Ngonidzashe Chiranga
BA ISAGO University College, Private Bag 149, Suite 268, Kgale View Postnet, Gaborone, Botswana.
Enowbi Batuo Michael
University of East London, Docklands Campus, 4-6 University Way, London E16 2RD, UK.
*Author to whom correspondence should be addressed.
Abstract
Aims: The study examines the relationship between private and public investment in Zimbabwe utilizing yearly time series data for the period 1967 to 2004.
Study Design: Time Series Study.
Place and Duration of Study: Zimbabwe, May 2011 to July 2011.
Methodology: Emphasis is placed on the direction of causality and the long run and short run effect of the two types of investment on each other. The paper constructs empirical models for both private and public investment, based on the flexible accelerator theory. Private investment is found to be cointegrated with public investment. A cointergration and VEC models are employed to assess the long and short run relationship existing between public and private investment.
Conclusion: The relationship between private and public investment is found to be insignificant and the direction of causality found to be unidirectional. The results support the notion that private investment precedes public investment.
Keywords: Private investment, public investment, causality, flexible accelerator theory, Zimbabwe