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Dynamic effects of public investment: Vector autoregressive evidence from six industrialized countries

Author

Listed:
  • Stefan Mittnik

    (Institute of Statistics and Econometrics, Christian Albrechts University at Kiel, Olshausenstr. 40, D-24098 Kiel, Germany)

  • Thorsten Neumann

    (Institute of Statistics and Econometrics, Christian Albrechts University at Kiel, Olshausenstr. 40, D-24098 Kiel, Germany)

Abstract

We analyze the dynamic relationship between public investment and output. Whereas existing empirical studies on the effects of public capital typically rely on single-equation models of the private sector, we investigate the role of public investment in an economy by examining impulse responses derived from vector autoregressions. Using data from six industrial countries, we specifically examine the following questions: does higher public investment lead to GDP increases; is there reverse causation from output to public investment; and what are the effects of expenditure-neutral budget shifts from public consumption to public investment.

Suggested Citation

  • Stefan Mittnik & Thorsten Neumann, 2001. "Dynamic effects of public investment: Vector autoregressive evidence from six industrialized countries," Empirical Economics, Springer, vol. 26(2), pages 429-446.
    • Handle: RePEc:spr:empeco:v:26:y:2001:i:2:p:429-446
    Note: received: April 1999/Final version accepted: August 2000
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    Keywords

    Fiscal Policy · Public Investment · Vector Autoregression · Impulse Response Analysis;

    JEL classification:

    • H54 - Public Economics - - National Government Expenditures and Related Policies - - - Infrastructures
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models

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