New Convergence Criteria in the Relationship between Public and Private Investments in the CEMAC and WAEMU: Crowding Out or Driving in?


Authors : Linda Julie Tiague Zanfack; Armand Gilbert Noula

Volume/Issue : Volume 6 - 2021, Issue 7 - July

Google Scholar : http://bitly.ws/9nMw

Scribd : https://bit.ly/3hpOjl1

The objective of this paper is to study the conditional effect of the new convergence criteria on the relationship between private and public investment in CEMAC and WEAMU. The data used come from a combination of three sources, the WDI database, various convergence reports in the Franc Zone and the IMF's International Financial Statistics (IFS). Using a retrospective analysis over the period 1994-2016 and the instrumental variables estimator, the results are as follows: There is a crowding out effect of public investment on investment in CEMAC and WAEMU; The adoption of the NCC in 1994 would have mitigated the crowding out effect in the dualism of public and private investment in CEMAC and WAEMU by about 0.096. The coefficients judging the crowding out are respectively -0.89 in the CAEMC and 0.599 in the WAEMU; Concerning the CAEMC countries, the respect of the public debt criterion (standard lower than or equal to 60% of GDP) would have led to a driving effect of public investment on private investment. The coefficient assigned to this cross-country variable is positive and significant at the 10% level (0.3334). The respect of the new criterion of overall budget balance (norm higher than or equal to -1.5% of GDP) since 1994 would have led to a spillover effect of public investment on private investment. The coefficient associated with the invpublic*dumsbg cross-tabulated variable is positive and significant at the 1% level and of the order of 0.59 points. The new SBG criterion (norm ≥ -3% of GDP) induces a positive and significant effect at the 10% threshold with a coefficient of 0.43. This result reflects a spillover effect of public investment on private investment in the WAEMU

Keywords : Private Investment, Conditional Effect, Convergence Criteria, Crowding Out, Crowding In.

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