An empirical analysis of sector-wise private investment for a small open economy

Figures & data

Table 1. Diagnostic Tests of ARDL Model for Agriculture Sector.

	Test statistics	P-value
Bounds test	F-statistic = 4.956		I (0)	I(1)
		10%	1.88	2.99
		5%	2.14	3.3
		2.5%	2.37	3.6
		1%	2.65	3.97
Serial Correlation LM Test (1)	Obs*R-squared= 1.283	0.275
Normality teat	Jarque-Bera =1.681	0.431
Heteroscedasticity Test: ARCH (1)	Obs*R-squared = 0.047	0.828
Ramsey Reset test	F-stat = 0.549	0.591
CointEq(−1)	−1.151*	0.000
Number of observations 1964–2015 (52obs)	R^2 =0.986 Adj R^2 =0.964
CUSUM		CUSUM Square

* indicates the coefficient significant at 1%.

Table 2. Long-run Relationship of Private Investment in Agriculture Sector.

Regressors	The dependent variable is private investment in the agriculture sector
	SBC selected model (3, 2, 2, 3, 1, 3, 2, 2, 0, 3)
	Coefficient	T-stats	P-value
Growth rate of value added (GVAA)	−0.037***	−1.853	0.080
User cost (UCA)	−0.002	−0.981	0.399
Credit available to agriculture (PCA)	0.259*	3.740	0.002
GDP growth (G)	−0.059**	−2.355	0.030
Physical infrastructure (PI)	−2.363	−1.435	0.168
Term of trade (TOTA)	1.017**	2.218	0.039
Foreign direct investment (FDI)	0.095	1.558	0.136
Fertilizer use (FERT)	0.726*	3.064	0.006
Water availability (WAT)	−2.731***	−2.043	0.055
CONS	12.55*	3.939	0.001

The coefficients significant at 1%, 5% & 10% are indicated by *, ** & *** respectively.

Table 3. Diagnostic Tests of ARDL Model for Industrial Sector.

	Test statistics		P-value
Bounds test	F-statistic = 3.886		I(0)	I(1)
		10%	1.88	2.99
		5%	2.14	3.3
		2.5%	2.37	3.6
		1%	2.65	3.97
Serial Correlation LM Test (1)	Obs*R-squared= 0.211	0.645
Normality teat	Jarque-Bera =0.606	0.738
Heteroscedasticity Test: ARCH (1)	Obs*R-squared= 0.035	0.850
Ramsey Reset test	F-stat = 0.182	0.671
CointEq(−1)	−1.035*	0.000
Number of observations 1964–2015 (52obs)	R^2 =0.981 Adj R^2 =0.972
CUSUM		CUSUM Square

* indicates the coefficient significant at 1%.

Table 4. Long-run Relationship of Private Investment in Industrial Sector.

Regressors	The dependent variable is private investment in the industrial sector
	SBC selected model
	(3, 1, 0, 0, 0, 0, 1, 0, 0, 0)
	Coefficient	T-stats	P-value
Growth rate of value added (GVAI)	−0.044*	−3.282	0.002
User cost (UCI)	0.00004	0.047	0.962
Credit available to private sector (PC)	0.554*	9.538	0.000
GDP growth (G)	0.120*	4.392	0.000
Physical infrastructure (PI)	9.118*	7.316	0.000
Term of trade (TOTI)	−0.701	−1.173	0.249
Foreign direct investment (FDI)	−0.041	−1.585	0.122
Public investment in industry (${\mathrm{I}}_{\mathrm{I}}^{\mathrm{P}\mathrm{U}\mathrm{B}}$)	−0.045	−0.778	0.441
Political stability (POL)	0.011**	2.688	0.011
Nationalisation dummy (ND)	−0.660*	−7.944	0.000
Government dummy (GD)	−0.248*	−4.865	0.000
CONS	5.826*	4.027	0.000

The coefficients significant at 1% & 5% are indicated by * & ** respectively.

Table 5. Diagnostic Tests of ARDL Model for Services Sector.

	Test statistics		P-value
Bounds test	F-statistic = 6.873		I(0)	I(1)
		10%	1.83	2.94
		5%	2.06	3.24
		2.5%	2.28	3.5
		1%	2.54	3.86
Serial Correlation LM Test (1)	Obs*R-squared= 2.21	0.149
Normality teat	Jarque-Bera = 1.003	0.605
Heteroscedasticity Test: ARCH (1)	Obs*R-squared = 0.006	0.935
Ramsey Reset test	F-stat = 1.686	0.201
CointEq(−1)	−0.369*	0.000
Number of observations 1964–2015 (52obs)	R^2 =0.996 Adj R^2 =0.994
CUSUM		CUSUM Square

The coefficient significant at 1% is indicated by *.

Table 6. Long-run Relationship of Private Investment in Services Sector.

Regressors	The dependent variable is private investment in the services sector
	SBC selected model
	(1, 2, 2, 0, 3, 1, 0, 0, 1, 2, 0)
	Coefficient	T-stats	P-value
Growth rate of value added (GVAS)	0.075*	3.101	0.004
User cost (UCS)	0.005	1.609	0.119
Credit available to private sector (PC)	1.059*	7.481	0.000
GDP growth (G)	0.132*	3.762	0.000
Physical infrastructure (PI)	15.189*	3.386	0.002
Term of trade (TOTS)	−0.735	−0.575	0.569
Foreign direct investment (FDI)	0.117**	2.112	0.044
Public investment in services ($I_S^{PUB}$)	−0.951*	−5.307	0.000
Remittances (REM)	0.203***	2.000	0.056
Trade openness (OP)	−5.127*	2.742	0.010
CONS	5.221*	3.057	0.005

The coefficients significant at 1%, 5% & 10% are indicated by *, ** & *** respectively.

Appendix A1. Unit Root Table for Private Investment in Agriculture Sector.

Variables	Augmented Dickey Fuller Test		Phillips Perron Test
	Intercept	Intercept & Trend	Intercept	Intercept & Trend
$I_A^{PRI}$	−1.272 (0.634)	−2.746 (0.223)	−0.956 (0.761)	−2.671 (0.252)
Δ $I_A^{PRI}$	−8.643* (0.000)	−8.552* (0.000)	−9.376* (0.000)	−9.261* (0.000)
GVAA	−8.092* (0.000)	−8.037* (0.000)	−8.364* (0.000)	−8.433* (0.000)
ACA	−0.947 (0.764)	−1.679 (0.764)	−0.963 (0.759)	−1.906 (0.636)
ΔACA	−5.831* (0.000)	−5.799** (0.000)	−5.782* (0.000)	−5.745* (0.000)
FERT	−4.025* (0.002)	−2.396(0.376)	−15.255* (0.000)	−5.996* (0.000)
Wat	−2.982** (0.043)	−0.066 (0.994)	−3.261** (0.022)	−1.092 (0.920)
ΔWat	−9.141* (0.000)	−7.706* (0.000)	−9.295* (0.000)	−16.501* (0.000)
UCA	−6.591* (0.000)	−6.763* (0.000)	−6.979* (0.000)	−9.803* (0.000)
TOTA	−2.530 (0.114)	−2.386 (0.382)	−2.530 (0.114)	−2.386 (0.382)
ΔTOTA	−8.087* (0.000)	−8.212* (0.000)	−8.385* (0.000)	−9.080* (0.000)
FDI	−2.906*** (0.051)	−5.426* (0.000)	−2.852*** (0.058)	−5.419* (0.000)
G	−5.219* (0.000)	−5.606* (0.000)	−5.145* (0.000)	−5.519* (0.000)
PI^1	−2.071** (0.037)		−1.115 (0.237)
ΔPI			−3.708* (0.000)

P-values are provided in the brackets.

The coefficients significant at 1%, 5% & 10% are indicated by *, ** & *** respectively.

¹ PI is detrended using time and time square, so unit root is applied using ‘no constant’ specification.

Appendix A2. Short-run Dynamics of Private Investment in Agriculture Sector.

Regressors	Coefficient	P-value
$I_A^{PRI}$ (−1)	0.394**	0.014
ΔGAVA	0.013	0.142
ΔUCA	0.001	0.139
ΔACA	0.086	0.430
ΔFERT	1.462*	0.003
ΔWAT	3.21*	0.005
ΔG	0.034**	0.031
ΔPI	10.91**	0.044
ΔTOT	1.720**	0.049
ΔFDI	0.088**	0.034

The coefficients significant at 1% & 5% are indicated by * & ** respectively.

Appendix B1. Unit Root Table for Private Investment in Industrial Sector.

Variables	Augmented Dickey Fuller Test		Phillips Perron Test
	Intercept	Intercept & Trend	Intercept	Intercept & Trend
$I_I^{PRI}$	−0.810 (0.807)	−1.575 (0.789)	−0.903 (0.779)	−1.707 (0.733)
Δ $I_I^{PRI}$	−5.686* (0.000)	−5.634* (0.000)	−5.690* (0.000)	−5.640* (0.000)
GVAI	−5.532* (0.000)	−5.925* (0.000)	−5.499* (0.000)	−5.856* (0.000)
$I_I^{PUB}$	−2.188 (0.212)	−2.111 (0.527)	−2.124 (0.236)	−1.996 (0.589)
Δ$I_I^{PUB}$	−8.045* (0.000)	−7.947* (0.000)	−8.124* (0.000)	−8.062* (0.000)
UCI	−4.636* (0.000)	−4.568* (0.003)	−6.606* (0.000)	−6.503* (0.000)
TOTI	−1.928 (0.316)	−4.333* (0.006)	−1.655 (0.447)	−4.094** (0.015)
ΔTOTI	−6.384* (0.000)		−13.33* (0.000)
Pol	−2.399 (0.147)	−2.371 (0.389)	−2.670*** (0.086)	−2.648 (0.261)
ΔPol	−6.603* (0.000)	−6.537* (0.000)	−6.604* (0.000)	−6.538* (0.000)
PC	−1.289 (0.580)	−1.758 (0.709)	−1.783 (0.384)	−1.860 (0.660)
ΔPC	−5.002* (0.000)	−5.104* (0.000)	−5.048* (0.000)	−5.175* (0.000)
FDI	−2.906*** (0.051)	−5.426* (0.000)	−2.852*** (0.058)	−5.419* (0.000)
G	−5.219* (0.000)	−5.606* (0.000)	−5.145* (0.000)	−5.519* (0.000)
PI^1	−2.071** (0.037)		−1.115 (0.237)
ΔPI			−3.708* (0.000)

P-values are provided in the brackets. The statistics significant at 1%, 5% & 10% are indicated by *, ** & *** respectively. ¹ PI is detrended using time and time square, so unit root is applied using ‘no constant’ specification.

Appendix B2. Short-run Dynamics of Private Investment in Industrial Sector.

Regressors	Coefficient	P-value
$I_I^{PRI}$ (−1)	0.505*	0.005
GVAI	−0.023**	0.027
UCI	0.000	0.962
PC	0.574*	0.000
$I_I^{PUB}$	−0.047	0.475
POL	0.011**	0.015
G	0.065*	0.003
PI	9.444*	0.000
TOT	−0.726	0.283
FDI	−0.042	0.129
ND	−0.684*	0.000
GD	−0.257*	0.003

The coefficients significant at 1% & 5% are indicated by * & ** respectively.

Appendix C1. Unit Root Table for Private Investment in Services Sector.

Appendix C1. Unit Root Table for Private Investment in Services Sector.

Variables	Augmented Dickey Fuller Test		Phillips Perron Test
	Intercept	Intercept & Trend	Intercept	Intercept & Trend
$I_S^{PRI}$	0.201 (0.970)	−3.355*** (0.069)	0.145 (0.966)	−2.019 (0.577)
Δ$I_S^{PRI}$	−5.006* (0.000)	−5.200* (0.000)	−4.991* (0.000)	−5.187* (0.000)
GVAS	−5.171* (0.000)	−5.872* (0.000)	−5.101* (0.000)	−5.803* (0.000)
$I_S^{PUB}$	−1.783 (0.382)	−1.932 (0.623)	−1.659 (0.445)	−1.715 (0.730)
Δ$I_S^{PUB}$	−8.661* (0.000)	−6.581* (0.000)	−9.120* (0.000)	−11.871* (0.000)
UCS	−1.975 (0.296)	−5.470* (0.000)	−3.510** (0.011)	−4.513* (0.003)
TOTS	−2.134 (0.232)	−3.613** (0.038)	−2.031 (0.272)	−3.613** (0.038)
ΔTOTS	−7.490* (0.000)	−7.404* (0.000)	−7.997* (0.000)	−7.881* (0.000)
REM	−1.232 (0.653)	−1.799 (0.690)	−1.259 (0.641)	−1.548 (0.799)
ΔREM	−4.953* (0.000)	−4.923* (0.001)	−4.919* (0.000)	−4.881* (0.001)
OP	−3.279** (0.021)	−3.758** (0.027)	−3.303** (0.019)	−3.844** (0.022)
PC	−1.289 (0.580)	−1.758 (0.709)	−1.783 (0.384)	−1.860 (0.660)
ΔPC	−5.002* (0.000)	−5.104* (0.000)	−5.048* (0.000)	−5.175* (0.000)
FDI	−2.906*** (0.051)	−5.426* (0.000)	−2.852*** (0.058)	−5.419* (0.000)
G	−5.219* (0.000)	−5.606* (0.000)	−5.145* (0.000)	−5.519* (0.000)
PI^1	−2.071** (0.037)		−1.115 (0.237)
ΔPI			−3.708* (0.000)

P-values are provided in the brackets.

The statistics significant at 1%, 5% & 10% are indicated by *, ** & *** respectively.

¹ PI is detrended using time and time square, so unit root is applied using ‘no constant’ specification.

Appendix C2. Short-run Dynamics of Private Investment Services Sector.

Regressors	Coefficient	P-value
$I_S^{PRI}$ (−1)	−0.004	0.415
GVAS	0.018*	0.000
UCS	0.001	0.201
PC	0.391*	0.000
$I_S^{PUB}$	0.152*	0.002
G	0.029*	0.000
PI	5.616*	0.000
TOT	−0.271	0.548
FDI	−0.004	0.714
REM	0.304*	0.000
OP	−1.895*	0.007

The coefficients significant at 1% are indicated by *.