DOES DOMESTIC INVESTMENT CONTRIBUTE TO ECONOMIC GROWTH IN URUGUAY? WHAT DID THE EMPIRICAL FACTS SAY?

Sayef Bakari; Sofien  Tiba; Nissar  Fakraoui

Sayef Bakari Department of Economics Sciences, Faculty of Economic Sciences and Management of Tunis, University of Tunis El Manar, (Tunisia)
Sofien Tiba Department of Economics Sciences, Faculty of Economic Sciences and Management of Sfax, University of Sfax
Nissar Fakraoui Department of Economics Sciences, Higher Institute of Companies Administration, University of Gafsa

Abstract

The fundamental role of domestic investment to provide economic prosperity is very well recognized by the economic theory since the Mercantilist theory. Hence, we investigate the impact of domestic investment on economic growth for the case of the Uruguayan economy over the period 1960-2017. For this aim, we employ the Vector Error Correction Model (VECM). Our highlights reveal the absence of a significant impact of domestic investment on growth in the short- and long-run. Due to the marginal role of domestic investment played in the Uruguayan economy, the weak saving rate couldn’t significantly help the economy and creating wealth. Therefore, a strong saving policy is required to encourage domestic investors and reevaluate their crucial role in the economic process of Uruguay.