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Private and Givernment Investment: A Study of Three OECD Countries

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  • Mehdi Monadjemi
  • Hyeonseung Huh

Abstract

This paper examines the relationship between private investment and government spending in Australia, Britain and the United States. Since all time series data are stationary in first difference and cointegrated, these series are represented by an error correction model. Variance decomposition and impulse response functions are employed to investigate the effects of government spending on private investment. Generally the empirical results provide limited support for "crowding out" effects of government investment on private investment. The rate of interest and the corporate profit ability showed significant effects on private investment in two out of three cases. [E62, E63]

Suggested Citation

  • Mehdi Monadjemi & Hyeonseung Huh, 1998. "Private and Givernment Investment: A Study of Three OECD Countries," International Economic Journal, Taylor & Francis Journals, vol. 12(2), pages 93-104.
    • Handle: RePEc:taf:intecj:v:12:y:1998:i:2:p:93-104
    DOI: 10.1080/10168739800000015
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    References listed on IDEAS

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    1. Johansen, Soren, 1988. "Statistical analysis of cointegration vectors," Journal of Economic Dynamics and Control, Elsevier, vol. 12(2-3), pages 231-254.
    2. Feldstein, Martin, 1982. "Government deficits and aggregate demand," Journal of Monetary Economics, Elsevier, vol. 9(1), pages 1-20.
    3. Robert Engle & Clive Granger, 2015. "Co-integration and error correction: Representation, estimation, and testing," Applied Econometrics, Russian Presidential Academy of National Economy and Public Administration (RANEPA), vol. 39(3), pages 106-135.
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    Cited by:

    1. Stephen S. Everhart & Mariusz A. Sumlinski, 2001. "Trends in Private Investment in Developing Countries : Statistics for 1970-2000 and the Impact on Private Investment of Corruption and the Quality of Public Investment," World Bank Publications - Books, The World Bank Group, number 13989, April.
    2. 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.
    3. Taiwo Akinlo & Olusola Joel Oyeleke, 2018. "Effects of Government Expenditure on Private Investment in Nigerian Economy (1980–2016)," Emerging Economy Studies, International Management Institute, vol. 4(2), pages 147-156, November.

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