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The Linkage Between Public and Private Investment: A Co-integration Analysis of a Panel of Developing Countries

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  • Lutfi Erden

    (Hacettepe University)

  • Randall G. Holcombe

    ()
    (Florida State University)

Abstract

This study uses panel data from 19 developing countries from 1980 to 1997 to examine the impact of public investment on private investment. A model is developed to identify both the short run and long-run effects of public investment on private investment, builds in the role of uncertainty on investment, and uses co-integration tests on panel data to check the time series properties of the data. The empirical results show that public investment is complementary to private investment in developing economies, and that credit constraints restrict the amount of private investment.

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File URL: http://college.holycross.edu/RePEc/eej/Archive/Volume32/V32N3P479_492.pdf
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Bibliographic Info

Article provided by Eastern Economic Association in its journal Eastern Economic Journal.

Volume (Year): 32 (2006)
Issue (Month): 3 (Summer)
Pages: 479-492

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Handle: RePEc:eej:eeconj:v:32:y:2006:i:3:p:479-492

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  1. M. O. Odedokun, 1997. "Relative effects of public versus private investment spending on economic efficiency and growth in developing countries," Applied Economics, Taylor & Francis Journals, vol. 29(10), pages 1325-1336.
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Cited by:
  1. Moritz Cruz & Peter Kriesler, 2010. "International Reserves, Effective Demand and Growth," Review of Political Economy, Taylor & Francis Journals, vol. 22(4), pages 569-587.
  2. Farla, Kristine & de Crombrugghe, Denis & Verspagen, Bart, 2013. "Institutions, Foreign Direct Investment, and Domestic Investment: crowding out or crowding in?," MERIT Working Papers 054, United Nations University - Maastricht Economic and Social Research Institute on Innovation and Technology (MERIT).
  3. Diogo Barbosa & Vitor M. Carvalho & Paulo J. Pereira, 2013. "The interaction between firms and Government in the context of investment decisions: a real options approach," FEP Working Papers 507, Universidade do Porto, Faculdade de Economia do Porto.
  4. Sallahuddin Hassan & Zalila Othman & Mohd Zaini Abd Karim, 2011. "Private and Public Investment in Malaysia: A Panel Time-Series Analysis," International Journal of Economics and Financial Issues, Econjournals, vol. 1(4), pages 199-210.
  5. M.Rosaria Alfano & A. Laura Baraldi, 2008. "The design of electoral rules and their impact on economic growth: the Italian case," Working Papers 3_2008, D.E.S. (Department of Economic Studies), University of Naples "Parthenope", Italy.

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