An econometric model of the determinants of private investment and a CGE model of the impact of democracy on investment and economic growth in Fiji

Narayan, Paresh Kumar 2008, An econometric model of the determinants of private investment and a CGE model of the impact of democracy on investment and economic growth in Fiji, International journal of social economics, vol. 35, no. 12, pp. 1017-1031.

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Title An econometric model of the determinants of private investment and a CGE model of the impact of democracy on investment and economic growth in Fiji
Author(s) Narayan, Paresh Kumar
Journal name International journal of social economics
Volume number 35
Issue number 12
Start page 1017
End page 1031
Publisher Emerald Group Publishing
Place of publication Bradford, England
Publication date 2008
ISSN 0306-8293
1758-6712
Keyword(s) Fiji
democracy
investments
economic equilibrium
Summary Purpose – The purpose of this paper is to construct an econometric model of the determinants of private investment with a particular focus on the impact of democracy on investment.

Design/methodology/approach – The first step was to econometrically derive the long-run elasticities; then to modify the Fiji computable general equilibrium (CGE) model to incorporate the investment function. Also the econometrically derived long run elasticities in the CGE model were used.

Findings – It was found that democracy has a positive and statistically significant impact on private investment in Fiji. The paper's simulation of Fiji becoming a fully democratic country on investment and other macroeconomic fundamentals, based on a CGE model, reveals that real gross domestic product and real national welfare increase by around 0.01 and 0.05 per cent, respectively; government savings and revenue performance improves; there is a trade balance surplus; and both private consumption and disposable income increase by around 0.05 and 0.12 per cent, respectively.

Originality/value –
This is the first study that uses a CGE model to examine the impact of democracy, via investment, on other macroeconomic fundaments. No other study is known to have modelled democracy in a CGE framework.
Language eng
Field of Research 140299 Applied Economics not elsewhere classified
HERDC Research category C1 Refereed article in a scholarly journal
HERDC collection year 2008
Copyright notice ©2008, Emerald Group Publishing Limited
Persistent URL http://hdl.handle.net/10536/DRO/DU:30017822

Document type: Journal Article
Collection: School of Accounting, Economics and Finance
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