Factors Affecting Public Investment in Manufacturing Sector of Pakistan
Authors: Gulzar Ali
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Public Investment in manufacturing sector has emerged as one of the most active part all over the world. In Pakistan public investment had made a significant contribution in different sectors and has played a fundamental role in the financial system of the country. This study has been an attempt to identify the factors, which affect public investment in manufacturing sector significantly in Pakistan. The data used in this study are from 1981 to 2014. Descriptive as well as quantitative techniques are applied to derive the results and advance statistical software E-views are used. In time-series analysis there always remains a suspicion about spurious relationship. This research study is also based on time-series data, that’s why before going to estimate the model, the data are tested by applying Augmented Dickey Fuller (ADF), but the data used in the study did not show any sign of spurious relationship. In order to capture the effect of various factors affecting public investment in manufacturing sector, the investment accelerator model is used and regressed through NLS and ARIMA model. The regression results shows that the variables Value-added in large-scale manufacturing sector (Vm), and Lagged Public Investment in Large-Scale Manufacturing Sector (Igm(-1)), Index of Price of Capital (Ipk), Change in Domestic Credit available to Public Sector (ΔDcp) and dummy (Dps) for political stability and favorable economic conditions of the country plays a significant role in public investment in manufacturing sector. The study recommends that the government should create a sufficient demand by increasing domestic purchasing power, by export expansion, by import substitutions through assets redistribution. The study also found that stable political condition also necessary for the rapid economic and investment growth.