An econometric analysis of macroeconomic determinants of investment function

ABSTRACT: The goal of this study is to carry out an econometric analysis of determinants of investment behavior in three different countries namely Brazil, Malaysia and India within the period 1960-2011. To this end, we use multiple regression and panel regression analysis to investigate the effect of each one of the following parameters on the rate of investment. Trade openness in GDP, the share of Budget Balance in GDP, Inflation Rate, Last Year Growth Rate of GDP, and real Interest Rate of each country. Using multiple regression analysis the likely effect of each one of these parameters on each country is estimated individually and then, we will use panel data (pooled crosssectional time series) to analyze the effect of each one of these parameters on the rate of investment as a group of these countries. The result of this study suggests that the share of gross fixed capital formation in GDP is negatively associated with real interest rate and positively associated with trade openness, the share of budget balance in GDP, the GDP growth of last year and inflation rate. Keywords: Trade openness, the share of budget balance, inflation rate, last year of growth rate of GDP, interest rate and investment function. …………………………………………………………………………………………………………………………