Determinants of private domesticinvestment in Palestine: time series analysis

Awad, brahim M.
Al-Jerashi, Ghada K.
Alabaddi, Zaid Ahmad
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Purpose–This empirical paper aims to examine the impact of interest rate (IR) and political instability(POLINS) on Palestine’s domestic private investment.Design/methodology/approach–A set of econometric techniques of time series data are adopted to meetthe study objectives. They include regression analysis, unit root tests, cointegration test, ARDL & Bound tests,VAR test and Granger causality test.Findings–The study’s primary results complement the neoclassical approach, which states that the IR isnegatively associated with domestic private investment. The empirical results reveal that there is no long-runrelationship. Also, there is no causality between domestic investment and lending rates. Accordingly, thesefindings alert policymakers to draw a series of steps to minimize the IR at a minimum to stimulate investmentfor improved economic growth and development.Practical implications–There is still no national currency in Palestine. The Palestinian MonetaryAuthority (PMA) is advised to set an appropriate ratio of the IR for the currencies-in-circulation in Palestine forboosting investment and economic development.Originality/value–This paper provides new background information to both policymakers and researcherson the main determinants of investment in Palestine using econometric analysis. Accordingly, this critical issueis required to be examined in Palestine for stimulating investment.
Econometrics, Investment, Investment, Palestine, Times series