Examining the impact of public investment and private investment on economic growth: empirical evidence from BRICS nations

Abstract

: This paper examines the factors impacting economic growth and the interlinkages of public investment, foreign direct investment (FDI), and private domestic investment using a panel data sample of Brazil, Russia, India, China and South Africa (BRICS) group of nations covering the time period of 1990 to 2014. We have made use of economic growth models suggested by Vu Le and Suruga (2005) in order to estimate economic growth and the individual impact of public investment on FDI and private domestic investment, respectively. The empirical results indicate that the private domestic investment along with FDI play a significant role in contributing towards economic growth. Further, analysing the impact of public investment on FDI and private domestic investment suggests that an increase in public investment in BRICS nations reduces the positive impact of FDI and private domestic investment on economic growth (crowding-out effect) when exceeding certain extent levels. Hence, we can conclude that from an overall prospective, public investment in BRICS nations has a substitutable effect on FDI and private domestic investment.