Economic Growth and Public and Private Investment Returns
ISEG-UL Working Paper No. 14/2016/DE/UECE
20 Pages Posted: 18 Jul 2016
Date Written: June 3, 2016
We study the macroeconomic effects of public and private investment in 17 OECD economies through a VAR analysis with annual data from 1960 to 2014. From impulse response functions we find that public investment had a positive growth effect in most countries, and a contractionary effect in Finland, UK, Sweden, Japan, and Canada. Public investment led to private investment crowding out in Belgium, Ireland, Finland, Canada, Sweden, the UK and crowding-in effects in the rest of the countries. Private investment has a positive growth effect in all countries; crowds-out (crowds-in) public investment in Belgium and Sweden (in the rest of the countries). The partial rates of return of public and private investment are mostly positive.
Keywords: Fiscal Policy, Public Investment, Private Investment, Impulse Response Functions, VAR
JEL Classification: C32, E22, E62
Suggested Citation: Suggested Citation