Advanced Search
MyIDEAS: Login to save this article or follow this journal

Effects of public investment on sectoral private investment: A factor augmented VAR approach

Contents:

Author Info

  • Fujii, Takao
  • Hiraga, Kazuki
  • Kozuka, Masafumi
Registered author(s):

    Abstract

    Public investment decreases aggregate private investment in both neoclassical and Keynesian models. There are no findings, however, on how public investment affects private investment on a disaggregated basis, such as sectoral private investment. More specifically, previous research has neglected the distinctions of sectoral investment behavior in response to public investment and the possibility of crowd-in effects in some industries, such as industries blessed with public demand. Meanwhile, public investment decreases sectoral private investment not only by keeping rental cost high, but also by differences in the resource misallocation effect of public investment itself; one sector receives a positive wealth effect while another suffers the opposite. In this paper we use a factor-augmented VAR (FAVAR), a model capable of analyzing large-scale VAR models, to investigate the extent to which public investment is crowded out or crowded in in different categories of industrial investment. Our results demonstrate that public investment confers different effects, both quantitative and qualitative, in individual sectors. This implies that public investment reaps different benefits in different sectors and that it can bring the worse effect of resource misallocation on some sectors.

    Download Info

    If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
    File URL: http://www.sciencedirect.com/science/article/pii/S0889158312000597
    Download Restriction: Full text for ScienceDirect subscribers only

    As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.

    Bibliographic Info

    Article provided by Elsevier in its journal Journal of the Japanese and International Economies.

    Volume (Year): 27 (2013)
    Issue (Month): C ()
    Pages: 35-47

    as in new window
    Handle: RePEc:eee:jjieco:v:27:y:2013:i:c:p:35-47

    Contact details of provider:
    Web page: http://www.elsevier.com/locate/inca/622903

    Related research

    Keywords: Fiscal policy; Investment; Crowding-out; Crowding-in; FAVAR;

    Find related papers by JEL classification:

    References

    References listed on IDEAS
    Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
    as in new window
    1. Ben S. Bernanke & Jean Boivin & Piotr Eliasz, 2004. "Measuring the Effects of Monetary Policy: A Factor-Augmented Vector Autoregressive (FAVAR) Approach," NBER Working Papers 10220, National Bureau of Economic Research, Inc.
    2. Alberto Alesina & Silvia Ardagna & Roberto Perotti & Fabio Schiantarelli, 1999. "Fiscal Policy, Profits, and Investment," NBER Working Papers 7207, National Bureau of Economic Research, Inc.
    3. Voss, Graham M., 2002. "Public and private investment in the United States and Canada," Economic Modelling, Elsevier, Elsevier, vol. 19(4), pages 641-664, August.
    4. Christopher N. Annala & Raymond G. Batina & James P. Feehan, 2008. "Empirical Impact Of Public Infrastructure On The Japanese Economy," The Japanese Economic Review, Japanese Economic Association, Japanese Economic Association, vol. 59(4), pages 419-437.
    5. Aschauer, David Alan, 1989. "Does public capital crowd out private capital?," Journal of Monetary Economics, Elsevier, Elsevier, vol. 24(2), pages 171-188, September.
    6. Mario Forni & Luca Gambetti, 2010. "Fiscal Foresight and the Effects of Government Spending," Working Papers, Barcelona Graduate School of Economics 460, Barcelona Graduate School of Economics.
    7. David Aschauer, 1988. "Is public expenditure productive?," Staff Memoranda, Federal Reserve Bank of Chicago 88-7, Federal Reserve Bank of Chicago.
    8. Christopher J. Nekarda & Valerie A. Ramey, 2010. "Industry evidence on the effects of government spending," Finance and Economics Discussion Series, Board of Governors of the Federal Reserve System (U.S.) 2010-28, Board of Governors of the Federal Reserve System (U.S.).
    9. Masahiko Shibamoto, 2007. "An Analysis Of Monetary Policy Shocks In Japan: A Factor Augmented Vector Autoregressive Approach," The Japanese Economic Review, Japanese Economic Association, Japanese Economic Association, vol. 58(4), pages 484-503.
    10. Hamaaki, Junya, 2008. "Investment responses to Japanese tax reforms: A cross-industry comparison," Japan and the World Economy, Elsevier, Elsevier, vol. 20(4), pages 542-562, December.
    11. Laganà, Gianluca & Sgro, Pasquale Michael, 2011. "A factor-augmented VAR approach: The effect of a rise in the US personal income tax rate on the US and Canada," Economic Modelling, Elsevier, Elsevier, vol. 28(3), pages 1163-1169, May.
    12. Thomas Laubach, 2010. "Fiscal Policy and Interest Rates: The Role of Sovereign Default Risk," NBER Chapters, National Bureau of Economic Research, Inc, in: NBER International Seminar on Macroeconomics 2010, pages 7-29 National Bureau of Economic Research, Inc.
    13. Shin-ichi Fukuda & Takeo Hoshi & Eric Leeper, 2011. "Fiscal Policy and Crisis," NBER Books, National Bureau of Economic Research, Inc, National Bureau of Economic Research, Inc, number fuku12-1.
    14. Baxter, Marianne & King, Robert G, 1993. "Fiscal Policy in General Equilibrium," American Economic Review, American Economic Association, American Economic Association, vol. 83(3), pages 315-34, June.
    15. repec:hrv:faseco:3353756 is not listed on IDEAS
    16. Takero Doi & Takeo Hoshi & Tatsuyoshi Okimoto, 2011. "Japanese Government Debt and Sustainability of Fiscal Policy," NBER Working Papers 17305, National Bureau of Economic Research, Inc.
    17. Campbell, John Y., 1994. "Inspecting the mechanism: An analytical approach to the stochastic growth model," Journal of Monetary Economics, Elsevier, Elsevier, vol. 33(3), pages 463-506, June.
    18. Keiichi Hori & Makoto Saito & Koichi Ando, 2006. "What Caused Fixed Investment To Stagnate During The 1990s In Japan? Evidence From Panel Data Of Listed Companies," The Japanese Economic Review, Japanese Economic Association, Japanese Economic Association, vol. 57(2), pages 283-306.
    19. Carlos Vargas-Silva, 2008. "The effect of monetary policy on housing: a factor-augmented vector autoregression (FAVAR) approach," Applied Economics Letters, Taylor & Francis Journals, Taylor & Francis Journals, vol. 15(10), pages 749-752.
    20. Alfredo M. Pereira & Jorge M. Andraz, 2003. "On the Impact of Public Investment On the Performance of U.S. Industries," Public Finance Review, , , vol. 31(1), pages 66-90, January.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as in new window

    Cited by:
    1. Ryuta Ray Kato & Hiroaki Miyamoto, 2012. "Fiscal Stimulus and Labor Market Dynamics in Japan," Working Papers, Research Institute, International University of Japan EMS_2012_19, Research Institute, International University of Japan.

    Lists

    This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

    Statistics

    Access and download statistics

    Corrections

    When requesting a correction, please mention this item's handle: RePEc:eee:jjieco:v:27:y:2013:i:c:p:35-47. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Zhang, Lei).

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If references are entirely missing, you can add them using this form.

    If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.