Public Investment, Foreign Direct Investment, and Budget Deficit

AbstractThe budget deficit is a worldwide economic problem that reduces the effectiveness of public policies in public finance. Public business leaders and theorists struggle to find appropriate solutions to address the budget deficit. However, in most countries, the budget deficit is still one of the most critical challenges. Grounded in Keynes’s general theory, the purpose of this quantitative correlational study was to examine the relationship between public investment, foreign direct investment, and budget deficit. Secondary data collected from the World Bank website representing the 76 low-income and low-middle-income countries were analyzed using multiple regression. The multiple linear regression results indicated the model was able to significantly predict budget deficit, F(2, 73) = 14.05, p \u3c .001, R2 = .72. However, public investment (t = –1.279, p \u3c .003) was the only statistically significant predictor. A key recommendation is for public leaders to identify and promote public investment and foreign direct investment that may increase public revenue and decrease the budget deficit. The implications for positive social change include the opportunity for public leaders to improve their decision-making by promoting public investment and foreign direct investment that positively affect individuals and communities