Public and Private Spending: Some Australian Evidence

1995 ◽  
Vol 6 (1) ◽  
pp. 41-51
Author(s):  
Mehdi S. Monadjemi
Keyword(s):  
Public Investment ◽  
Government Expenditure ◽  
Private Investment ◽  
Crowding Out ◽  
Empirical Relationships ◽  
Public And Private ◽  
Investment Expenditure ◽  
Private Expenditure ◽  
Private Spending ◽  
The Relationship

This paper examines empirical relationships between government expenditure and private spending in Australia, to see whether government expenditure reduces, or crowds out, private expenditure or encourages it. Particular attention is paid to the effect on private investment expenditure and the possibility of a change occuring in the relationship between public and private is examined. Regression analysis found no significant evidence of crowding out. Public investment was found to compliment private investment in the period before 1974, but not in the period since then.

scholarly journals The Impact of Public Investment on Private Investment: A Disaggregated Analysis

2006 ◽  
Vol 45 (4II) ◽  
pp. 639-663 ◽  
Author(s):  
Noman Saeed ◽  
Kalim Hyder ◽  
Asghar Ali
Keyword(s):  
Public Investment ◽  
Empirical Studies ◽  
Empirical Work ◽  
Private Investment ◽  
Economic Literature ◽  
Public And Private ◽  
Multiplier Effect ◽  
The Impact ◽  
The Relationship ◽  
Statistical Results

The impact of public investment on private investment has been a matter of great interest in economic literature. Classical economists believed that public investment crowds out private investment. While Keynesian economists counter this argument and argued that public investment increases or crowds in private investment because of the multiplier effect. Many of the empirical studies have directly examined this by testing whether a statistically significant relationship exists or not, between public investment and private investment. The empirical work appears with mixed statistical results on the relationship between public and private investment. Results of Erenburg and Wohar (1995), Pereira (2001, 2003), Pereira and Roca-Sagales (2001), Hyder (2002) and Naqvi (2002) showed that public investment crowds in private investment while Pradhan, Ratha and Sarma (1990), Haque and Montiel (1993), Ahmed (1994), Voss (2002) and Narayan (2004) showed that public investment crowds out private investment.

scholarly journals Crowding-in or Crowding-out? Modelling the Relationship between Public and Private Fixed Capital Formation Using Co-integration Analysis: The Case of Pakistan 1964-2000

2002 ◽  
Vol 41 (3) ◽  
pp. 255-276 ◽  
Author(s):  
Naveed H. Naqvi
Keyword(s):  
Economic Growth ◽  
Positive Impact ◽  
Public Investment ◽  
Unit Roots ◽  
Private Investment ◽  
Annual Data ◽  
Public And Private ◽  
Fixed Capital Formation ◽  
Private And Public ◽  
The Relationship

This paper uses the Co-integrating VAR’s [Johansen (1988); Ericsson, et al. (1998)] to examine the relationship between economic growth, public investment, and private investment in the presence of unit roots. Exogeneity is not implicitly assumed but explicitly tested for, and evidence of co-integration and feedback between public and private investment leads to a model in the form of a parsimonious VAR. The analysis is conducted using 37 years of annual data for Pakistan. The analysis suggests that public investment has a positive impact on private investment, and that economic growth drives both private and public investment as predicted by the accelerator-based models.

scholarly journals DEFISIT APBN DAN PEMULIHAN EKONOMI PASCA KRISIS

Media Ekonomi ◽  
2017 ◽  
Vol 20 (1) ◽  
pp. 47
Author(s):  
Haryo Kuncoro
Keyword(s):  
Economic Growth ◽  
Fiscal Policy ◽  
Government Expenditure ◽  
Private Investment ◽  
Demand System ◽  
Crowding Out ◽  
Almost Ideal Demand System ◽  
Private Expenditure ◽  
The Government ◽  
The Impact

<p>Governments play an important role in an economy. The role is presented by both its revenue and expenditure. The net difference of the revenue and expenditure, therefore, determines the type of fiscal policy implementation. This research attempts to analyze the impact of deficit fiscal policy on the private expenditure in the case of Indonesia over the postcrisis 2000-09 periods. The analysis is based on the goods market equilibrium. The approach is designed to analyze whether the government expenditure crowds out the private expenditure. In order to reach the objective of the study, I used the Almost Ideal Demand System (AIDS) and compared to the Generalized Almost Ideal Demand System (GAIDS). The estimation result of quarterly data shows that the government expenditure did not crowd out the private expenditure. The crowding out only occurs partially especially on the private investment. However, the government expenditure totally remains stimulating the private expenditures. This, in turn, leads to increase the gross domestic product. Those results indicate that the expansionary fiscal policy effectively affects to the economic growth especially after economic crisis in 1997. Even, the income elasticity was much greated than that in the precrisis periods. Furthermore, to keep the moment of sustainable economic growth in the long term, the government should conduct discipline fiscal policy based on the prudent principles and coordination and consistency between fiscal and monetary controls.<br />Keywords: Deficit, consumption, investment, government expenditure, crowding out</p>

scholarly journals DEFISIT APBN DAN PEMULIHAN EKONOMI PASCA KRISIS

2013 ◽  
Vol 2 (2) ◽  
Author(s):  
Haryo Kuncoro
Keyword(s):  
Fiscal Policy ◽  
Income Elasticity ◽  
Government Expenditure ◽  
Private Investment ◽  
Crowding Out ◽  
Private Expenditure ◽  
Goods Market ◽  
Expenditure System ◽  
The Government ◽  
The Impact

This research attempts to analyze the impact of deficit fiscal policy on the private expenditure in the case of Indonesia over the post crisis 2000-09 periods. The analysis is based on the goods market equilibrium. The approach is designed to analyze whether the government expenditure crowds out the private expenditure. In order to reach the objective of the study,this researchused the Linear Expenditure System (LES) and compared to the Almost Ideal Demand System (AIDS). The estimation result of quarterly data shows that the government expenditure did not crowd out the private expenditure. The crowding out only occurs partially especially on the private investment. However, the government expenditure totally remains stimulating the private expenditures. This, in turn, leads to increase the gross domestic product. Those results indicate that the expansionary fiscal policy effectively affects to the economic growth especially after economic crisis in 1997. Even, the income elasticity was much greater than that in the pre-crisis periodsDOI: 10.15408/sjie.v2i2.2422

scholarly journals How Plausible the Predicted Superiority of Private Over Public Investment Still Stands, If Ever?

2021 ◽  
Vol 13 (10) ◽  
pp. 87
Author(s):  
Benjamin García Páez
Keyword(s):  
Public Investment ◽  
Empirical Work ◽  
Private Investment ◽  
Developed Countries ◽  
Public And Private ◽  
The Public ◽  
Financial Liberalisation ◽  
Work Done ◽  
The Relationship ◽  
Theoretical Issues

This essay aims to test the hypothesis held by the Theory of Financial Liberalisation in the sense that financial resources diverted by non-market forces are inefficiently allocated, ergo, public investment is less productive than private investment. The relationship between public and &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;private investment and the productivity in both the public and the private&nbsp;&nbsp;&nbsp; &nbsp;sectors are then analysed in search of empirical evidence to discern the endurance of such hypothesis throughout the changing evolution of the Mexican financial system since 1970 up to 2019. The paper is arranged in four sections. Firstly, some historical financial liberalisation events are put forward. Secondly, theoretical issues concerning the concept&nbsp;&nbsp; &nbsp;of productivity of the two types of investment are discussed. It also reviews empirical work done on the productivity in less-developed countries. Thirdly, an attempt to measure productivity of both public and private investment in Mexico is made. It then describes the methodology and the estimation results obtained for Mexico are launched. Finally, main conclusions are delivered.

scholarly journals Do FDI and Public Investment Crowd in/out Domestic Private Investment in the SADC Region

2021 ◽  
Vol 19 (1) ◽  
pp. 3-25
Author(s):  
Eslon Ngeendepi ◽  
Andrew Phiri
Keyword(s):  
Capital Expenditure ◽  
Public Investment ◽  
Trade Openness ◽  
Government Expenditure ◽  
Private Investment ◽  
Policy Implications ◽  
Domestic Investment ◽  
Government Investment ◽  
Long Run ◽  
Short Run

Our study examines the crowding-in/out effect of foreign direct investment and government expenditure on private domestic investment for 15 members of the Southern African Development Community (SADC) for the period 1991–2019. The study employed the panel Pool Mean Group (PMG)/ARDL technique in estimating the short-run and long-run cointegration relationships between FDI, government capital expenditure and domestic private investment and adds three more variables for control purposes (interest rate, GDP growth rate and trade openness). For the full sample, FDI crowds-in domestic investment whilst government crowds-out domestic investment. However, in performing a sensitivity analysis, in which the sample was segregated into low and high income economies, both FDI and government investment crowd-in domestic investment whilst government expenditure crowds-out domestic investment in lower income SADC countries with no effect of FDI on domestic investment. Policy implications are discussed.

scholarly journals Impact of Public Debt, Deficit and Debt Financing on Private Investment in a Large Country: Evidence from the United States

2020 ◽  
Vol 6 (2) ◽  
pp. 139-161
Author(s):  
Amir Kia
Keyword(s):  
Public Debt ◽  
Public Investment ◽  
Government Expenditure ◽  
Private Investment ◽  
Adjustment Costs ◽  
The United States ◽  
Direct Impact ◽  
Large Country ◽  
Long Run ◽  
Short Run

This paper analyses the direct impact of fiscal variables on private investment. The current literature ignores one or more fiscal variables and, in many cases, the foreign financing of debt. In this paper, an aggregate investment function for an economy in which firms incur adjustment costs in their investment process is developed. The developed model incorporates the direct impact of government expenditure, public debt and investment, deficits and foreign-financed debt on private investment. The model is tested on US data. It is found that public investment does not have any impact on private investment, but government expenditure, deficit, debt and foreign-financed debt crowd out private investment over the long run. However, deficit crowds in the private investment over the short run.

Public and Private Investment and Economic Growth: An Empirical Investigation

2018 ◽  
Vol 63 (2) ◽  
pp. 87-106 ◽  
Author(s):  
Garikai Makuyana ◽  
Nicholas M. Odhiambo
Keyword(s):  
Economic Growth ◽  
Positive Impact ◽  
Public Investment ◽  
Private Investment ◽  
Current Debate ◽  
Annual Data ◽  
Public And Private ◽  
Long Run ◽  
Short Run ◽  
Crowd Out

Abstract This paper provides new evidence to contribute to the current debate on the relative impact of public and private investment on economic growth and the crowding effect between the two components of investment in South Africa. Using annual data from 1970 to 2017, the study applies the recently developed Autoregressive Distributed Lag (ARDL)-bounds testing approach to cointegration. The study finds that private investment has a positive impact on economic growth both in the long run and short run, while public investment has a negative effect on economic growth in the long run. Further, in the long run, gross public investment is found to crowd out private investment, while its infrastructural component is found to crowd in private investment. The results of the study also reveal that both gross public investment and non-infrastructural public investment crowd out private investment in the short run. Overall, the study finds private investment to be more important than public investment in the South African economic growth process and that the importance of infrastructural public investment in stimulating private investment in the long run cannot be over-emphasized.

Does public investment crowd-out private investment in India

2017 ◽  
Vol 9 (1) ◽  
pp. 50-69 ◽  
Author(s):  
Shanmugam Muthu
Keyword(s):  
Public Investment ◽  
Private Investment ◽  
Infrastructure Investment ◽  
Public Infrastructure ◽  
Public And Private ◽  
Content Type ◽  
Macroeconomic Uncertainty ◽  
Long Run ◽  
Short Run

Purpose The purpose of this paper is to examine the crowding-in or crowding-out relationship between public and private investment in India. Design/methodology/approach The autoregressive distributed lag (ARDL) bounds testing approach is used to estimate the long run relationship between public and private investment using annual data from 1971-1972 to 2009-2010. Findings Based on the empirical findings, it is observed that aggregate public investment has a positive effect on private investment both in the long run and the short run. In contrast to the findings of previous studies, no significant impact of public infrastructure investment on private investments is found in the long run, while non-infrastructure investment has a positive impact on private investment in the short run. Among the various categories of infrastructure sector, a positive and significant impact in the case of electricity, gas and water supply is observed. Similarly, the result indicates that public investment in machinery and equipment and construction have substantially influenced the private sector machinery and equipment in the long run and the short run. In the case of the role of macroeconomic uncertainty, the results find a negative and significant impact on private investment and the impact is higher in the short run than in the long run. Originality/value The present study extends the literature in three important ways: First, the study attempts to capture heterogeneity of public investment as well as disaggregate effects of two different categories of public infrastructure on private investment. The extent to which two different types of public assets impact the private investment in machinery and equipment investment is also examined. Second, ARDL model is used to examine the long-run relationship between public and private investment. Third, the study incorporates macroeconomic uncertainty into the empirical analysis to examine the role of macroeconomic volatility in determining private investment decision.

Sign in / Sign up

Export Citation Format

Share Document