Determinants of private investment in Brazil: An empirical analysis of the period 1996-2011

Abstract

Empirical studies regarding the determinants of private investments in developing countries including Brazil have demonstrated the negative impact of high inflation rates on investments. However, the recent Brazilian experience clearly shows that stabilization in and of itself is not capable of recovering the investment rates. With this in mind, this study's goal is to answer with the help of econometric simulation models, the questions: what are the key-drivers to assess the Brazilian economy and what are the key-factors to bes considered when investments are made? To answer the 1st question, it was evaluated the impacts of macro-seconomic variables on private investments using a strategic bias and a long term cash management vision plan. The estimates demonstrate empirical crowding-in evidence of public investments in infrastructure over private investments. As for public investments (non-infrastructural), the researchers suggest that the crowding-in impact dislocates private investments. All these indicators were obtained as presented in the therory with the exception of the real interest rates variable (r) in which the researchers observed that the coefficient is positive and insignificant in the estimated equation.© Medwell Journals, 2012.