Role of Public Expenditures and Macroeconomic Uncertainty in Determining Private Investment in Large Scale Manufacturing Sector of Pakistan

Considering the importance of large scale manufacturing sector in Pakistan economy we analysed investment behavior of private sector in large scale manufacturing. The main emphasis in this paper has been to explore the role of public expenditures development and non development) and macroeconomic uncertainty in determining private sector’s fixed investment in large scale manufacturing. It is found that most of the series are non-stationary and there is one cointegrating relationship between the private investment, public consumption expenditures, public development expenditures and size of market. The dynamic ECM model of private investment indicates public development expenditures enhance the private investment whereas non-development expenditures and macroeconomic uncertainty negatively affect private investment.