The Determinants of Investment Activity in Greece (1960-’99)

The present paper examines the determinants of investment activity in Greece over the period 1960-1999. It describes briefly the investment activity in Greece and then tests for the factors that presumably influence this investment activity. The paper uses a multiple linear regression model incorporating various factors that presumably influence investment activity in Greece, based on theoretical as well as on empirical evidence. The results confirm the anticipated positive relationship between investment and output, investment and profitability, and the anticipated negative relationship between investment and interest rate. Also, the first oil crisis and the incorporation of Greece in the wider EU financial area in 1992 seem to have influenced investment activity. Finally, the paper estimates investment elasticities with respect to the various factors, and makes some comments concerning the encouragement of investment activity in Greece.