PRIVATE INVESTMENT AND MACROECONOMIC ADJUSTMENT:A Survey

Abstract

This article reviews theories of investment behavior and examines empirical studies of investment in developing countries. The emphasis is on understanding the interactions among macroeconomic policies, structural adjustment, and private investment. The article deals with the effect of exchange rate policy on investment, the relationship between public and private investment, the importance of market imperfections and financial constraints on capital formation, and the effect of economic instability on irreversible investment decisions.