Determinants of Private Investment: The Time Series Evidence from Jordan Using ARDL Approach

This study investigates the determinants of private investment in Jordan for the period 1976-2012. The ARDL (Autoregressive Distributed Lag) approach to cointegration is employed to test the existence of a long run relationship, as well as to study the short run dynamics of private investment in Jordan. To that end, demand for private investment is estimated as a function of real Gross Domestic Product (real GDP), real interest rate, and real public investment. The original problem focuses on the assessment of factors that have either stimulated or dampened private sector investment in Jordan during the study period. The results of this study confirm some results found elsewhere in the empirical literature. Econometric evidence indicates that private investment is positively related to real GDP growth, and negatively related to real interest rates, and real public investment. The study concluded that improving the productive sectors in the national economy may enhance private investment in the long run, and the government capital expenditures have insignificant role in boosting private sector investment initiatives, implying that public investment projects should be reviewed, reassessed, and prioritized so that crowd in private investment.