Public Policy and Private Investment in Pakistan

Shabib Haider Syed and Muhammad Tariq Majeed

Abstract

This paper analyzes the importance of government policy in determining private investment in Pakistan. The empirical results show that public sector investment, changes in bank credit to the private sector and degree of capacity in the economy are playing an important role in determination of private investment. The level of expected GDP also positively affected the private investment, which is consistent with flexible accelerator model. The results are also consistent with the maintained hypothesis that public infrastructure investment is complimentary to private investment; whereas other kinds of public investment tend to be substitutes for private investment.