Assessing the effect of gross domestic savings on domestic private investment in Africa.

Abstract

This study examines the effect of gross domestic savings on domestic private investment in Africa from 1988-2018 for 43 countries. Using a panel data from World Development Indicators and a system generalized methods of moments method, the results indicate that; (1) gross domestic savings significantly affects private domestic investment both in the short and long run (2) domestic private investment is also positively influenced by domestic credit to private sector in both the short and long run (3) trade as a percentage of GDP positively affects domestic private investments in both the short and long run. Given these findings the study recommends that policy makers must focus on formulation and implementation of policies aimed at increasing savings, increasing access to cheap and affordable credit to the private sector and improving the business environment for productive activities to flourish and spur further private domestic investments. Keywords; Africa, Gross Domestic Savings, Domestic Private Investment