Gambiya'da iç borcu özel yatırım üzerindeki etkileri

Recently, domestic borrowing has been a major source of deficit financing for many developing countries. Evidence suggests that this form of funding saves developing countries from currency risks as domestic debts are denominated in the local currency. However, it carries higher interest rates than external debts. Also, excessive domestic borrowing might crowd out private credit and investment. It is in this context that we seek to answer our main research questions. First, does domestic debt have a negative effect on private investment in the Gambia? Second, does interest rate have a crowding-out effect on private investment? To answer these research questions in an empirical way, we developed an investment model based on the neoclassical investment function and considered an annual time series data set from 1980 to 2013. To examine the nexus between our dependent variable, private investment, and the explanatory variables, we used an Autoregressive Distributed Lag (ARDL) model. Based on the bounds test result, a long run relationship exists between our variables. Furthermore, domestic debt was found to have a negative effect on private investment in the short run. On the hand, the real interest rates had a crowding-out effect on private investment in the long run but a positive effect in the short run. This study will be a guide for policymakers on formulating fiscal and monetary policies to curb the level of domestic borrowing to optimal or sustainable levels. It will also provide them will tools to enable the private sector which is a key pillar in any nation's economic growth and development.