The Impact of Public Debt on GDP Growth – the Debt Multiplier in the Case of Albania

2017 ◽  
Vol 3 (4) ◽  
pp. 60-67
Author(s):  
Dorjan Teliti ◽  
Adriatik Kotorri
Keyword(s):  
Public Debt ◽  
Impact Analysis ◽  
Public Investment ◽  
Objective Assessment ◽  
Private Investment ◽  
Optimal Level ◽  
Practical Calculation ◽  
Public And Private ◽  
Public Investments ◽  
The Impact

Debates about the level of public debt and their impact on the level of investment and the economy as a whole, are permanent due to the lack of an optimal level offered by economic literature. The recent banking financial crisis brought some EU countries with very high levels of public debt, beyond the maximum limits laid down in EU membership agreements. While in developing countries, public debt is part of the economic debates and has often caused political confrontation. Although with a lower public sensitivity compared to the level of investment, unemployment and the level of prices, public debt plays an important role in the proper performance of these parameters. Increasing or decreasing public spending and especially public investment directly affects the level of investments, employment, prices, production, etc. Public debt, for the most part, is used to finance these public investments. Put together, the level of public debt affects precisely these parameters. Specifically, the level of public debt directly influencing public investment (G) primarily affects the level of public and private investment (I), the level of employment, the level of consumption in an economy (C) and the level of production affecting the level of imports (I) and exports (X). All of the above parameters are part of the Gross Domestic Product or GDP. The public debt level impact analysis at the level of GDP is measured by the Keynesian public debt multipliers. It is precisely the simplified and practical calculation that this multiplier is the focus of this paper. The aim is to calculate the Keynesian public debt multipliers for Albania to analyze the efficiency of public debt utilization in recent years when it has been part of the debate because of its rise to high historical levels. The calculation of this Multiplier for the developed Western countries as well as the emerging countries of the region creates the possibility of a comparative analysis to have a more objective assessment of the efficiency of using public debt in function of the Albanian economy’s growth in the last 10 years.

scholarly journals The Risk of Long-Term Financing of Public Investments

2019 ◽  
Vol 2 (2) ◽  
pp. 42
Author(s):  
Krzysztof Jarosiński ◽  
Benedykt Opałka
Keyword(s):  
Public Debt ◽  
Negative Impact ◽  
Capital Expenditure ◽  
Public Investment ◽  
Point Of View ◽  
Risk Category ◽  
Investment Projects ◽  
The Public ◽  
Public Investments ◽  
The Impact

The risk of financing of public investments is a phenomenon that accompanies development processes in a permanent manner. Investments in the public sector are generally characterized by relatively long implementation cycles and involve significant capital expenditure and the necessity of often parallel running a large number of investment projects. In the processes of this type of investment a specific risk category of financing of this type of investment is quite often taken into account, given that such projects are financed mainly from budgetary resources: the state budget and self-government budgets. Economic practice indicates an importance of the proper selection of the method of the financing of new investments and taking into account new funds from various sources. This situation is often the result of a shortage of budgetary resources from which public investments could be financed. There may be difficulties in financing investments resulting from the emergence of a risk of budgetary deficit and the public debt. This risk may have a negative impact on investment decisions and may adversely affect the future course of ongoing investment projects. The purpose of the paper is to undertake studies on the conditions of financing investments from the point of view of the possibility of budget deficit and public debt and the impact of changes in the financial situation on the overall level of risk of public investment. The text is an invitation to undertake a broader discussion on financing public investments in conditions of limited public financial resources.

Impact of Public and Private Infrastructure Investment on Economic Growth: Evidence from India

2020 ◽  
Vol 12 (2) ◽  
pp. 119-138
Author(s):  
Nishija Unnikrishnan ◽  
Thomas Paul Kattookaran
Keyword(s):  
Economic Growth ◽  
Public Investment ◽  
Impulse Response Function ◽  
Decomposition Analysis ◽  
Private Investment ◽  
Infrastructure Investment ◽  
Public Infrastructure ◽  
Public And Private ◽  
Long Run ◽  
The Impact

Literature presents contradictory views regarding the impact of public and private investment on the economic growth of a country. India being a developing country, where the major share of investment is by public sector, the question which props up is what among public and private investment is contributing more towards the economic growth of the country. In this framework, the gross domestic product (GDP) can be fairly explained as a function of public infrastructure investment and private infrastructure investment. Johansen’s co-integration was used to test the long-run relationship between the variables over the period from 1961–1962 to 2016–2017. A vector error correction model (VECM) along with an impulse response function and variance decomposition analysis was done to measure the impact of public infrastructure investment and private infrastructure investment on the GDP. Based on the empirical evidence discussed earlier, it was evident that both public and private infrastructure investments have a significant impact on the economic growth of the nation. Findings which came up in this study correlate to majority findings of past literature that, when compared with public investment, it is private investment which is capable of giving a better impetus to economic growth.

scholarly journals Econometric Study of the Impact of Public and Private Investment on Economic Growth in Algeria during the Period (1970-2017)

2020 ◽  
pp. 58-69
Author(s):  
Hadjoudj Abdallah ◽  
TchiKo Faouzi
Keyword(s):  
Economic Growth ◽  
Error Correction ◽  
Correction Term ◽  
Public Investment ◽  
Unit Root Test ◽  
Private Investment ◽  
Bounds Testing ◽  
Public And Private ◽  
Percent Increase ◽  
The Impact

This article examines the impact of public and private investment on economic growth in Algeria covering the period from 1970 to 2017. By applying the Auto-Regressive Distributed Lag model (ARDL)-(bounds testing approach). The key findings of the study concluded that there is a long-run relationship between public and private investment and economic growth in Algeria. The result of the Augmented Dickey Fuller unit root test (ADF) showed that the variables are stationary at the level and at the first difference. In addition, the results of the cointegration test indicated that the variables are cointegrated and therefore have the ability to move together over the long term. The parsimonious error correction mechanism showed that private investment is significantly related to economic growth. The result indicated that a 1 percent increase in the present value of private investment, on average, stimulates economic growth by 0.09 percent. Similarly, the value of public investment is positively related to economic growth. On average, a 1 percent increase in public investment stimulates growth in Algeria by 0.05 percent. the results of short-run dynamics reveal that, the error correction term (ECM) is negative and significant (-0.54), which means that 54% of the disequilibrium will be adjusted annually.

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 Direct and indirect effects of investment on community welfare

2019 ◽  
Vol 16 (3) ◽  
pp. 206-216 ◽  
Author(s):  
Baldric Siregar
Keyword(s):  
Economic Growth ◽  
Economic Development ◽  
Local Governments ◽  
Public Investment ◽  
Private Investment ◽  
Public And Private ◽  
The People ◽  
Private And Public ◽  
The Government ◽  
The Impact

Despite the fact that the government is the main actor of economic development, it also invites private parties to be actively involved in the economic development. The main objective of public and private investment is economic development. But the ultimate goal of investment and economic development itself is to improve the welfare of the community. This study seeks to investigate the effect of private and public investment on economic growth. Furthermore, it also investigates the impact the investment on the community welfare either directly or indirectly through economic growth by way of analyzing the data on private and public investment, economic growth, and the human development index of local governments in Indonesia for the period from 2012 to 2016. Hypotheses were tested using PLS (Partial Least Squares). The results show that both private and public investment directly influence economic growth and indirectly affect the welfare of the people through economic growth. Direct test results also show the positive effect of economic growth on community welfare.

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.

scholarly journals EFFECT OF PUBLIC DEBTS ON PRIVATE-SECTOR INVESTMENT IN NIGERIA

2021 ◽  
Vol 4 (1) ◽  
pp. 96-111
Author(s):  
Osuoha Chionyeka ◽  
◽  
Theresa Udenwa ◽  
Nneka Nwala ◽  
◽  
...  
Keyword(s):  
Private Sector ◽  
Error Correction ◽  
Public Debt ◽  
Private Investment ◽  
Ordinary Least Squares ◽  
Debt Service ◽  
Private Sector Investment ◽  
Domestic Debt ◽  
Private Investors ◽  
The Impact

This study empirically analyzed the effect of Public Debt and Private-Sector Investment in Nigeria (1986-2017). This study employed secondary data in the analysis. The study used the ordinary least square method (OLS) and Error Correction Model (ECM) tools of analysis in the investigation of the impact and relationship among the economic variables. The Ordinary Least Squares (OLS) and the Error Correction Models show that there is a strong relationship between Private Investment (PIVN)in Nigeria and Public Debt in Nigeria. Public Debt in Nigeria has a negative effect on the economy both in the short run and long run especially the Public Domestic Debt in Nigeria and Public External Debts in Nigeria. This is because the more government borrows from both the domestic and the external the more it crowds out investment especially the domestic debt crowds out private investment through lack of access to funds. The ECM result revealed that Public Debt Service in Nigeria has a positive effect on Private Investment (PIVN)in Nigeria, this is because when the government pays back loans or debts, it increases access to funds by the private investors thereby increasing the level of private investment in the country. Therefore, the study recommends that government should design a mechanism for effective and efficient Public Debt Service Management in Nigeria to increase access to funds by private investors and thereby increasing and enhancing Private Investment (PIVN) in Nigeria.

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