IDEAS home Printed from https://ideas.repec.org/a/mof/journl/ppr007e.html
   My bibliography  Save this article

Crowding - in Effect of Public Investment on Private Investment

Author

Listed:
  • Toshiya Hatano

    (Professor, Meiji University)

Abstract

This study investigates the effects of public investment on private investment based on Japanese empirical data. Since public capital is accumulated in tandem with the accumulation of private capital in the long-run from a historical perspective, it is quite natural that there is a positive relationship between private investment and public investment. However, some previous studies have provided evidence for the crowding-in effect of public investment on private investment while other studies have provided evidence for the crowding-out effect. What is the reason for these inconsistent results on the crowding-in effect? In order to answer this question, we will consider the possibility of analyzing the long-run relationship between private and public investment on the stock phase rather than the flow phase. Our empirical results show that there is a cointegration relationship between private capital and public capital. Accordingly, the relationship between private and public investment should be represented by an error correction mechanism designed to achieve a long-run stock equilibrium. Estimating the error correction model, we affirm the crowding-in effect of public investment on private investment.

Suggested Citation

  • Toshiya Hatano, 2010. "Crowding - in Effect of Public Investment on Private Investment," Public Policy Review, Policy Research Institute, Ministry of Finance Japan, vol. 6(1), pages 105-120, February.
  • Handle: RePEc:mof:journl:ppr007e
    as

    Download full text from publisher

    File URL: http://www.mof.go.jp/english/pri/publication/pp_review/ppr007/ppr007e.pdf
    Download Restriction: no

    References listed on IDEAS

    as
    1. Aschauer, David Alan, 1989. "Does public capital crowd out private capital?," Journal of Monetary Economics, Elsevier, vol. 24(2), pages 171-188, September.
    2. Granger, C W J, 1969. "Investigating Causal Relations by Econometric Models and Cross-Spectral Methods," Econometrica, Econometric Society, vol. 37(3), pages 424-438, July.
    3. Erenburg, S. J. & Wohar, Mark E., 1995. "Public and private investment: Are there causal linkages?," Journal of Macroeconomics, Elsevier, vol. 17(1), pages 1-30.
    4. Sarantis Kalyvitis, 2003. "Public Investment Rules and Endogenous Growth with Empirical Evidence from Canada," Scottish Journal of Political Economy, Scottish Economic Society, vol. 50(1), pages 90-110, February.
    5. Voss, Graham M., 2002. "Public and private investment in the United States and Canada," Economic Modelling, Elsevier, vol. 19(4), pages 641-664, August.
    6. Otto, Glenn & Voss, Graham, 1996. "Public Capital and Private Production in Australia," MPRA Paper 52110, University Library of Munich, Germany.
    7. Alfredo M. Pereira, 2001. "On the Effects of Public Investment on Private Investment: What Crowds in What?," Public Finance Review, , vol. 29(1), pages 3-25, 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


    Cited by:

    1. Tomomi Miyazaki, 2016. "Interactions between Regional Public and Private Investment: Evidence from Japanese Prefectures," Discussion Papers 1608, Graduate School of Economics, Kobe University.
    2. Dreger, Christian & Reimers, Hans-Eggert, 2014. "On the relationship between public and private investment in the euro area," Discussion Papers 344, European University Viadrina Frankfurt (Oder), Department of Business Administration and Economics.
    3. Hüseyin Şen & Ayşe Kaya, 2014. "Crowding-Out or Crowding-In? Analyzing the Effects of Government Spending on Private Investment in Turkey," Panoeconomicus, Savez ekonomista Vojvodine, Novi Sad, Serbia, vol. 61(6), pages 617-630, December.
    4. Dreger, Christian & Reimers, Hans-Eggert, 2016. "Does public investment stimulate private investment? Evidence for the euro area," Economic Modelling, Elsevier, vol. 58(C), pages 154-158.
    5. repec:spr:anresc:v:60:y:2018:i:1:d:10.1007_s00168-017-0852-3 is not listed on IDEAS

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:mof:journl:ppr007e. 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: (Policy Research Institute). General contact details of provider: http://edirc.repec.org/data/prigvjp.html .

    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 CitEc recognized a reference but did not link an item in RePEc 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 RePEc Author Service 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.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.