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The Impact of Public Debt on Private Investment: Sri Lankan Experience

International Journal of Business and Social Research

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ISSN 2164-2559
2164-2540
 
Authentication Code dc
 
Title Statement The Impact of Public Debt on Private Investment: Sri Lankan Experience
 
Added Entry - Uncontrolled Name Thilanka, H.R.A. Chamini
Sri Ranjith, J.G.
Department of Economics and Statistics, Facuty of Arts, University of Peradeniya
Department of Economics and Statistics, Faculty of Arts, University of Peradeniya
http://arts.pdn.ac.lk/econ/jgsr.html
 
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Summary, etc. Governments tend to borrow financial resources from domestic as well as external sector when its tax revenues are not sufficient to meet the required financial needs. In the Sri Lankan context, there has been a gradual increasing trend in the accumulation of public debt since the post liberalization phase. Herein, this ambience of public debt has caused to make congenial effects while leading to some unfavorable effects on the economy. Hence, this study examines the impact of public debt on private investment in Sri Lanka using the annual data from 1978-2015. The study follows some econometric steps respectively unit root test, Johansen co-integration test and finally employing the Vector Error Correction Model (VECM) to find out the long-run impact. Empirical findings of our study show the evidence for the presence of crowding-in effect of public debt on private investment in the long-run implying that government has diverted borrowing funds as spurring private sector. Further, real GDP also affects positively on private investment suggesting further expansion of the economy is inevitable. Hence, the policy compilation with regard to fiscal operations should be aimed at the well- managed borrowing for the purpose of boosting private investment further.   
 
Publication, Distribution, Etc. LAR Center Press
 
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https://thejournalofbusiness.org/index.php/site/article/view/1122
 
Data Source Entry International Journal of Business and Social Research; Vol 8, No 8 (2018): August
 
Language Note eng
 
Terms Governing Use and Reproduction Note Copyright (c) 2018 H.R.A. Chamini Thilanka, J.G. Sri Ranjith