Presentation is loading. Please wait.

Presentation is loading. Please wait.

LANIRAN TEMITOPE JOSEPH.  - Introduction and Problem Statement  - Theoretical Background  - Methodology and Scope  - Model Estimation  - Empirical.

Similar presentations


Presentation on theme: "LANIRAN TEMITOPE JOSEPH.  - Introduction and Problem Statement  - Theoretical Background  - Methodology and Scope  - Model Estimation  - Empirical."— Presentation transcript:

1 LANIRAN TEMITOPE JOSEPH

2  - Introduction and Problem Statement  - Theoretical Background  - Methodology and Scope  - Model Estimation  - Empirical Findings  - Conclusion

3  - Importance Of investment cannot be overemphasized, however, the exact extent to which investment is crucial remains a subject of speculation.  - This study aims at understanding the behaviour of investment in different economic climates.

4  Basic growth models of Solow(1956) and Swan (1956) predicted investment as fundamental for economic growth  “Countries that grow fast are countries that invest a substantial fraction of their GDP and countries that fail to grow are countries that fail to invest" (Sala-i-Martin,2002).

5  - A country each was selected from the three strata of the World Bank ease of doing business.  - Gross capital formation = investment  GDP per capita = economic growth

6  -how long it takes in starting a business  -dealing with construction permit  -availability of electricity  -ease of registering property  -ease of getting credit  -availability of protection for investors  - tax paying  -ease of inter border trade  -contract enforcement  - Insolvency resolvency. Source: World Bank (2012)

7  The formulation below describes in a linear form the original work of Solow (1956)  Y=A f (K, L)  Yt = A t K α t L t 1− α < α <  The Solow growth model posits that economic growth (y) is a function of investment (k).  Solow argued that investment preceded economic growth.  Thus, Y = f (K)  Yt = A t K t (Ak model)  For the purpose of this study, the equation above is modified to derive the one below:  Y = β o + β 1K + U α =

8

9  Where: LCK = Investment = Gross capital formation in Chad ;  LCY=Economic growth = GDP per capita in Chad

10  Where: LZK = Investment = Gross capital formation in Zambia ;  LZY= Economic growth = GDP per capita in Zambia

11  Where: LSK = Investment = Gross capital formation in Sweden ;  LSY= Economic growth = GDP per capita in Sweden

12 LCYLCK LCY LCK LZYLZK LZY LZK LSYLSK LSY LSK

13  Where: LCK = Investment = Gross capital formation in Chad ;  LCY=Economic growth = GDP per capita in Chad  LZK = Investment = Gross capital formation in Zambia ;  LZY= Economic growth = GDP per capita in Zambia  LSK = Investment = Gross capital formation in Sweden ;  LSY= Economic growth = GDP per capita in Sweden

14  The correlation matrix reveal a positive relationship between investment and economic growth for all three countries.  It also revealed a stronger relationship where economic environment is better.  It then suggests that the better the economic climate the stronger the relationship between investment and economic growth.

15  The empirical analysis using an OLS regression model revealed the relationship between investment and economic growth as stated below for each of the three countries, holding other variables constant.  Chad LCY = LCK + U  Zambia LZY = LZK + U  Sweden LSY = LSK + U

16  Chad: a one per cent increase in the investment level will yield a sixteen per cent increase in economic growth.  Zambia: a one per cent increase in the investment level will yield a eighteen per cent increase in economic growth.  Sweden: a one per cent increase in the investment level will yield a seventy five per cent increase in economic growth.

17  The empirical results suggested that, the better economic and business environment, the better the yield of investment in an economy. This then suggests that the economic climate of an economy is crucial and fundamental for the yield magnitude of investment to economic growth

18  Thank you.


Download ppt "LANIRAN TEMITOPE JOSEPH.  - Introduction and Problem Statement  - Theoretical Background  - Methodology and Scope  - Model Estimation  - Empirical."

Similar presentations


Ads by Google