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Advisor(s)
Abstract(s)
This paper examines the macroeconomic returns on public and private investments in 18 advanced
economies from 1965 to 2019, using a Vector Autoregressive (VAR) approach. We assess whether higher
investment levels drive economic growth and explore the interplay between public and private investments,
particularly regarding crowding-in and crowding-out effects. A sensitivity analysis, altering the order of
investments in the VAR model, tests the robustness of the results and highlights the dynamic relationships
between them. The findings show that private investment consistently stimulates growth, while public
investment’s impact varies by country. The analysis underscores the importance of investment sequencing,
suggesting the need for flexible policies and a deeper understanding of investment dynamics. This study
contributes to the debate on public investment’s role in fostering growth and offers empirical insights for
future economic policy and investment strategies.
Description
Keywords
Public Investment Macroeconomic Rates of Return Crowding-in/out
Pedagogical Context
Citation
Afonso, António, Jorge Caiado e Omar AI. Kanaan (2022). "Public and private investments : a VAR analysis of their impact on economic growth in 18 advanced economies". REM Working paper series, nº 0350/2024
Publisher
ISEG – REM (Research in Economics and Mathematics)