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The effects of infrastructure and public investment on the elasticity of private investment: an empirical investigation for Brazil

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  • Jefferson S. Fraga
  • Helder Lara Ferreira-Filho

Abstract

This study estimates the determinants of the elasticities of private investment andtotal investment for the Brazilian economy for the period between 1960 and 2013. It usesa Bayesian model averaging and weighted-average least-squares approach with a flexibleaccelerator model of investment equation and Kalman filtering techniques. We concludethat the aggregate infrastructure index (taken from the main component analysis) andpublic investment crowd-in private investment. The results indicate that private investmentis constrained by the availability of bank credit. Furthermore, we find that infrastructure stock and public investment are two of the main determinants of the elasticities of privateinvestment. This demonstrates that public investment, mainly in infrastructure, is of greatimportance in raising the sensitivity of private investment in the Brazilian economy. JEL Classification: H54; O40; E20.

Suggested Citation

  • Jefferson S. Fraga & Helder Lara Ferreira-Filho, 2023. "The effects of infrastructure and public investment on the elasticity of private investment: an empirical investigation for Brazil," Brazilian Journal of Political Economy, Center of Political Economy, vol. 43(1), pages 275-298.
    • Handle: RePEc:ekm:repojs:v:43:y:2023:i:1:p:275-298:id:2396
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    More about this item

    Keywords

    Infrastructure; private investment; elasticities;
    All these keywords.

    JEL classification:

    • H54 - Public Economics - - National Government Expenditures and Related Policies - - - Infrastructures
    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General
    • E20 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - General (includes Measurement and Data)

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