On the relationship between public and private investment in the euro area
This paper explores the long run relationship between public and private investment in the euro area in terms of capital stocks and gross investment flows. Panel techniques accounting for international spillovers are employed. While private and public capital stocks are cointegrated, the evidence is quite fragile for public and private investment flows. They enter a long run relationship only after fundamental drivers of private investment, such as demand and financing costs are included. According to the impulse response analysis, private investment reacts to shocks in public investment both in terms of stock and flow variables. In contrast, public investment is rather exogenous. Therefore, the lack of public investment might have restricted private investment and GDP growth in the euro area. The results have strong implications for the future direction of fiscal austerity programs to combat the euro area debt crisis.
|Date of creation:||2014|
|Date of revision:|
|Contact details of provider:|| Postal: Grosse Scharrnstrasse 59, 15230 Frankfurt (Oder)|
Phone: +49 (0)335 5534 2387
Fax: +49 (0)335 5534 2516
Web page: http://www.wiwi.euv-frankfurt-o.de/en/index.html
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Westerlund, Joakim, 2005.
"Testing for Error Correction in Panel Data,"
2005:11, Lund University, Department of Economics.
- M. Hashem Pesaran, 2007.
"A simple panel unit root test in the presence of cross-section dependence,"
Journal of Applied Econometrics,
John Wiley & Sons, Ltd., vol. 22(2), pages 265-312.
- Pesaran, M.H., 2003. "A Simple Panel Unit Root Test in the Presence of Cross Section Dependence," Cambridge Working Papers in Economics 0346, Faculty of Economics, University of Cambridge.
- Salotti, Simone & Marattin, Luigi, 2009.
"On the usefulness of government spending in the EU area,"
19171, University Library of Munich, Germany.
- Marattin, Luigi & Salotti, Simone, 2011. "On the usefulness of government spending in the EU area," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 40(6), pages 780-795.
- L. Marattin & S. Salotti, 2009. "On the usefulness of government spending in the EU area," Working Papers 686, Dipartimento Scienze Economiche, Universita' di Bologna.
- Salotti, Simone & Marattin, Luigi, 2009. "On the usefulness of government spending in the EU area," MPRA Paper 19476, University Library of Munich, Germany.
- António Afonso & Miguel St. Aubyn, 2009.
"Macroeconomic Rates Of Return Of Public And Private Investment: Crowding-In And Crowding-Out Effects,"
University of Manchester, vol. 77(s1), pages 21-39, 09.
- Afonso, António & St. Aubyn, Miguel, 2008. "Macroeconomic rates of return of public and private investment: crowding-in and crowding-out effects," Working Paper Series 0864, European Central Bank.
- António Afonso & Miguel St.Aubyn, 2008. "Macroeconomic Rates of Return of Public and Private Investment: Crowding-in and Crowding-out Effects," Working Papers Department of Economics 2008/06, ISEG - School of Economics and Management, Department of Economics, University of Lisbon.
- Antonio Afonso & Miguel St. Aubyn, . "Macroeconomic Rates of Return of Public and Private Investment: Crowding-in and Crowding-out Effects," EcoMod2007 23900000, EcoMod.
- César Calderón & Enrique Moral-Benito & Luis Servén, 2011.
"Is infrastructure capital productive? A dynamic heterogeneous approach,"
1103, Banco de España;Working Papers Homepage.
- César Calderón & Enrique Moral‐Benito & Luis Servén, 2015. "Is infrastructure capital productive? A dynamic heterogeneous approach," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 30(2), pages 177-198, 03.
- Calderon, Cesar & Moral-Benito, Enrique & Serven, Luis, 2011. "Is infrastructure capital productive ? a dynamic heterogeneous approach," Policy Research Working Paper Series 5682, The World Bank.
- Isabel Argimon & Jose Gonzalez-Paramo & Jose Roldan, 1997. "Evidence of public spending crowding-out from a panel of OECD countries," Applied Economics, Taylor & Francis Journals, vol. 29(8), pages 1001-1010.
- Holtz-Eakin, Douglas & Newey, Whitney & Rosen, Harvey S, 1988.
"Estimating Vector Autoregressions with Panel Data,"
Econometric Society, vol. 56(6), pages 1371-95, November.
- Tom Doan, . "RATS program to demonstrate IV estimation of VAR in panel data," Statistical Software Components RTZ00185, Boston College Department of Economics.
- M Arellano & O Bover, 1990.
"Another Look at the Instrumental Variable Estimation of Error-Components Models,"
CEP Discussion Papers
dp0007, Centre for Economic Performance, LSE.
- Arellano, Manuel & Bover, Olympia, 1995. "Another look at the instrumental variable estimation of error-components models," Journal of Econometrics, Elsevier, vol. 68(1), pages 29-51, July.
- Love, Inessa & Zicchino, Lea, 2006. "Financial development and dynamic investment behavior: Evidence from panel VAR," The Quarterly Review of Economics and Finance, Elsevier, vol. 46(2), pages 190-210, May.
- Kremers, Jeroen J M & Ericsson, Neil R & Dolado, Juan J, 1992.
"The Power of Cointegration Tests,"
Oxford Bulletin of Economics and Statistics,
Department of Economics, University of Oxford, vol. 54(3), pages 325-48, August.
- Roberto Perotti, 2008.
"In Search of the Transmission Mechanism of Fiscal Policy,"
in: NBER Macroeconomics Annual 2007, Volume 22, pages 169-226
National Bureau of Economic Research, Inc.
- Roberto Perotti, 2007. "In Search of the Transmission Mechanism of Fiscal Policy," NBER Working Papers 13143, National Bureau of Economic Research, Inc.
- David Aschauer, 1988.
"Does public capital crowd out private capital?,"
88-10, Federal Reserve Bank of Chicago.
- Sims, Christopher A & Stock, James H & Watson, Mark W, 1990. "Inference in Linear Time Series Models with Some Unit Roots," Econometrica, Econometric Society, vol. 58(1), pages 113-44, January.
- Manuel Arellano & Stephen Bond, 1991.
"Some Tests of Specification for Panel Data: Monte Carlo Evidence and an Application to Employment Equations,"
Review of Economic Studies,
Oxford University Press, vol. 58(2), pages 277-297.
- Tom Doan, . "RATS program to replicate Arellano-Bond 1991 dynamic panel," Statistical Software Components RTZ00169, Boston College Department of Economics.
- 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.
- Alan J. Auerbach & Yuriy Gorodnichenko, 2012.
"Measuring the Output Responses to Fiscal Policy,"
American Economic Journal: Economic Policy,
American Economic Association, vol. 4(2), pages 1-27, May.
- Valila, Timo & Mehrotra, Aaron, 2005. "Evolution And Determinants Of Public Investment In Europe," Economic and Financial Reports 2005/1, European Investment Bank, Economics Department.
- Damiaan Persyn & Joakim Westerlund, 2008. "Error-correction–based cointegration tests for panel data," Stata Journal, StataCorp LP, vol. 8(2), pages 232-241, June.
When requesting a correction, please mention this item's handle: RePEc:zbw:euvwdp:344. 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: (ZBW - German National Library of Economics)
If references are entirely missing, you can add them using this form.