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Public capital and asset prices: Time-series evidence from Japan

Author

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  • Hiraga, Kazuki
  • Kozuka, Masafumi
  • Miyazaki, Tomomi

Abstract

This research examines the effects of public infrastructure capital on asset prices in Japan over the period 1983:Q1–2008:Q4. The empirical results show that public infrastructure capital does not forecast stock returns and total factor productivity by the Granger causality test, and the contribution of public investment to stock returns is small based on variance decomposition using the Factor-Augmented vector autoregressive model. Our empirical evidence on the post high-growth era in Japan suggests that public infrastructure investment cannot be expected to play a key role in revitalizing capital markets.

Suggested Citation

  • Hiraga, Kazuki & Kozuka, Masafumi & Miyazaki, Tomomi, 2018. "Public capital and asset prices: Time-series evidence from Japan," Finance Research Letters, Elsevier, vol. 25(C), pages 172-176.
  • Handle: RePEc:eee:finlet:v:25:y:2018:i:c:p:172-176
    DOI: 10.1016/j.frl.2017.10.017
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    References listed on IDEAS

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    1. Kamada, Koichiro & Masuda, Kazuto, 2001. "Effects of Measurement Error on the Output Gap in Japan," Monetary and Economic Studies, Institute for Monetary and Economic Studies, Bank of Japan, vol. 19(2), pages 109-154, May.
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    5. Cecchetti, Stephen G & Karras, Georgios, 1994. "Sources of Output Fluctuations during the Interwar Period: Further Evidence on the Causes of the Great Depression," The Review of Economics and Statistics, MIT Press, vol. 76(1), pages 80-102, February.
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    7. Kengo Nutahara, 2013. "Asset Price Targeting Government Spending and Equilibrium Indeterminacy in A Sticky-Price Economy," CIGS Working Paper Series 13-003E, The Canon Institute for Global Studies.
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    More about this item

    Keywords

    Public infrastructure capital in Japan; Stock price targeting; Lag-Augmented vector autoregressive model; Factor-Augmented vector autoregressive model;

    JEL classification:

    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • H54 - Public Economics - - National Government Expenditures and Related Policies - - - Infrastructures

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