Cross-section Econometric Analyses, Monte Carlo Simulation and Scenario Planning Methodology: Brazilian Private Investments Case Study

Empirical studies regarding the private investment in developing countries, including Brazil, have demonstrated the high inflation’s rates negative impact on investment. However, the recent Brazilian’s experience clearly shows that stabilization is not capable of recovering investment’s rates. Therefore, the objectives of this studyare:a) to analyse the long term private investment’s in Brazil; b) analyze if the Brazilian economy has been impacted by the crowding-in or crowding-out effetcs; and c) analyze the macronomic variables’ behavior during the 2012 to 2017 period.In order to do this, we useda cross section econometricanalysis, Monte Carlo simulation for the data analysis and scenario planning methodology. The paper presents the main investment theories, and recent developments of these theories, as well as how they can be applied to the Brazilian data.The results show evidences of a public investment crowding-in effect in infrastructure over the private investment and the cost analyses relevance. All the analyzed variables’ signsare consistent with the theory, with the exception of the real interest’s rates, where the coefficient is positive and insignificant in the estimated equation.The reduction in the credit’s volume and the existence of political and economic instabilities showed that they are harmful to private investment in the analyzed period. The implementation of public policies in order to guarantee economic stability and improve the government’s credibility, along with the increaseof credit offer, could boost private investment in Brazil.