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Does infrastructure really cause growth?: the time scale dependent causality nexus between infrastructure investments and GDP

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Abstract

This paper investigates the relationship between infrastructure investments and economic activity in Sweden for the period 1800-2000. In order to overcome the problem of endogeneity, independent time scales are used to analyze the relationship. The paper also examines the dynamics between the variables by testing for causality in the Granger sense and constructing a vector autoregressive model separately for each time scale. The finding is that the causality nexus between growth and transport infrastructure investment is timescale-dependent since it reverses in a comparison of the short-run dynamics (2-4 years) and the longer-run dynamics (8-16 years). This causality reversal is unique for infrastructure investments compared to investments in other sectorsof the economy.

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File URL: http://www.transguide.org/swopec/CTS2012-15.pdf
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Bibliographic Info

Paper provided by CTS - Centre for Transport Studies Stockholm (KTH and VTI) in its series Working papers in Transport Economics with number 2012:15.

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Length: 31 pages
Date of creation: 04 May 2012
Date of revision:
Handle: RePEc:hhs:ctswps:2012_015

Contact details of provider:
Postal: Centrum för Transportstudier (CTS), Teknikringen 10, 100 44 Stockholm, Sweden
Web page: http://www.kth.se/abe/om_skolan/organisation/centra/cts

Related research

Keywords: Infrastructure; GDP growth; Investment; Time scale decomposition;

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  1. Gallegati Marco & Gallegati Mauro, 2007. "Wavelet Variance Analysis of Output in G-7 Countries," Studies in Nonlinear Dynamics & Econometrics, De Gruyter, vol. 11(3), pages 1-25, September.
  2. Luoto, Jani, 2011. "Aggregate infrastructure capital stock and long-run growth: Evidence from Finnish data," Journal of Development Economics, Elsevier, vol. 94(2), pages 181-191, March.
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