IDEAS home Printed from https://ideas.repec.org/p/npf/wpaper/20-312.html
   My bibliography  Save this paper

Did public investment crowd out private investment in India?

Author

Listed:
  • Honey Karun

    (International Monetary Fund)

  • Hrishikesh Vinod

    (Fordham University)

  • Chakraborty, Lekha S.

    (National Institute of Public Finance and Policy)

Abstract

Our paper uses the ME (Maximum Entropy) bootstrap method to overcome the econometric constraints of using a short time series after the publication of a new macroeconomic series in India. We use a short time series (quarterly data) of stationary and nonstationary variables between 2011-2016 to confirm the positive role of public infrastructure investment. The significant result has policy implications in terms of the current debate, whether public investment `crowds-in' rather than `crowds-out' private corporate investment in India.

Suggested Citation

  • Honey Karun & Hrishikesh Vinod & Chakraborty, Lekha S., 2020. "Did public investment crowd out private investment in India?," Working Papers 20/312, National Institute of Public Finance and Policy.
    • Handle: RePEc:npf:wpaper:20/312
    Note: Working Paper 312, 2020
    as

    Download full text from publisher

    File URL: https://www.nipfp.org.in/media/medialibrary/2020/07/WP_312_2020.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Chakraborty, Lekha S., 2006. "Fiscal deficit, capital formation, and crowding out: Evidence from India," Working Papers 06/43, National Institute of Public Finance and Policy.
    2. Pradyumna Dash, 2016. "The Impact of Public Investment on Private Investment: Evidence from India," Vikalpa: The Journal for Decision Makers, , vol. 41(4), pages 288-307, December.
    3. Sacchidananda Mukherjee, 2020. "Goods and Services Tax efficiency across Indian States: panel stochastic frontier analysis," Indian Economic Review, Springer, vol. 55(2), pages 225-251, December.
    4. Bahal, Girish & Raissi, Mehdi & Tulin, Volodymyr, 2018. "Crowding-out or crowding-in? Public and private investment in India," World Development, Elsevier, vol. 109(C), pages 323-333.
    5. Lekha Chakraborty, 2007. "Fiscal Deficit, Capital Formation, and Crowding Out in India: Evidence from an Asymmetric VAR Model," Economics Working Paper Archive wp_518, Levy Economics Institute.
    6. Hrishikesh D. Vinod, 2013. "Maximum Entropy Bootstrap Algorithm Enhancements," Fordham Economics Discussion Paper Series dp2013-04, Fordham University, Department of Economics.
    7. Chhibber, Ajay & Kalloor, Akshata, 2016. "Reviving Private Investment in India: Determinants and Policy Levers," Working Papers 16/181, National Institute of Public Finance and Policy.
    8. Vinod, Hrishikesh D. & Lopez-de-Lacalle, Javier, 2009. "Maximum Entropy Bootstrap for Time Series: The meboot R Package," Journal of Statistical Software, Foundation for Open Access Statistics, vol. 29(i05).
    9. Shah, Ajay, 2020. "Responding to the new coronavirus: An Indian policy perspective," Working Papers 20/309, National Institute of Public Finance and Policy.
    10. Pandey, Rita & Gupta, Manish & Sachdeva, Paavani & Singh, Abhishek, 2020. "Biodiversity Conservation in India: Mapping Key Sources and Quantum of Funds," Working Papers 20/311, National Institute of Public Finance and Policy.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Honoré S. Houngbedji & Nassibou Bassongui, 2021. "Investissement Public et Investissement Privé en Afrique Subsaharienne: Rôle de la Qualité Institutionnelle," African Development Review, African Development Bank, vol. 33(3), pages 466-478, September.
    2. Choudhury, Mita & Dubey, Jay Dev, 2020. "Equity in Intra-State Distribution of Public Spending on Health: The Case of Bihar and Tamil Nadu," Working Papers 20/315, National Institute of Public Finance and Policy.
    3. Chakraborty, Lekha S. & Thomas, Emmanuel & Gandhi, Piyush, 2020. "Natural Resources Revenue Buoyancy in India: Empirical Evidence From State-specific Mining Regime," Working Papers 20/313, National Institute of Public Finance and Policy.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Jagannath Mallick, 2019. "The effects of government investment shocks on private investment: Empirical evidence from the developing economy," Indian Economic Review, Springer, vol. 54(2), pages 291-316, December.
    2. Nusrat Akber & Megha Gupta & Kirtti Ranjan Paltasingh, 2020. "The Crowding-in/ out Debate in Investments in India: Fresh Evidence from NARDL Application," South Asian Journal of Macroeconomics and Public Finance, , vol. 9(2), pages 167-189, December.
    3. Sajad Ahmad Bhat & Bandi Kamaiah, 2021. "Fiscal policy and macroeconomic effects: structural macroeconometric model and simulation analysis," Journal of Social and Economic Development, Springer;Institute for Social and Economic Change, vol. 23(1), pages 81-105, June.
    4. Pravakar Sahoo & Ashwani Bishnoi, 2021. "Investment Slowdown in India: Role of Fiscal-Monetary policy and Economic Uncertainty," IEG Working Papers 439, Institute of Economic Growth.
    5. Chiranjivi, GVS & Sensarma, Rudra, 2023. "The effects of economic and financial shocks on private investment: A wavelet study of return and volatility spillovers," International Review of Financial Analysis, Elsevier, vol. 90(C).
    6. Ebi, Bassey Okon & Aladejare, Samson Adeniyi, 2022. "Oil Price Transmission, Deficit Financing and Capital Formation," Jurnal Ekonomi Malaysia, Faculty of Economics and Business, Universiti Kebangsaan Malaysia, vol. 56(1), pages 123-133.
    7. Aqil Khan & Mumtaz Ahmed & Salma Bibi, 2019. "Financial development and economic growth nexus for Pakistan: a revisit using maximum entropy bootstrap approach," Empirical Economics, Springer, vol. 57(4), pages 1157-1169, October.
    8. Sajad Ahmad Bhat & Javed Ahmad Bhat & Taufeeq Ajaz, 2020. "The Public–Private Investment Nexus In India: Evidence From A Policy Simulation Approach," Economic Annals, Faculty of Economics and Business, University of Belgrade, vol. 65(224), pages 101-128, January –.
    9. Mariano Méndez-Suárez, 2021. "Marketing Mix Modeling Using PLS-SEM, Bootstrapping the Model Coefficients," Mathematics, MDPI, vol. 9(15), pages 1-12, August.
    10. Chakraborty, Lekha S, 2014. "Macroeconomics of “NaMo” Budget 2014 in India," MPRA Paper 67045, University Library of Munich, Germany, revised 2014.
    11. Ghassan, Hassan B., 2011. "Public and Private Investment in Saudi Economy: Evidence from Weak Exogeneity and Bound Cointegration Tests," MPRA Paper 56537, University Library of Munich, Germany.
    12. Chakraborty, Lekha S. & Thomas, Emmanuel & Gandhi, Piyush, 2020. "Natural Resources Revenue Buoyancy in India: Empirical Evidence From State-specific Mining Regime," Working Papers 20/313, National Institute of Public Finance and Policy.
    13. Sofia São Marcos & Sofia Vale, 2024. "Is there a nonlinear relationship between public investment and private investment? Evidence from 21 Organization for Economic Cooperation and Development countries," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 29(1), pages 887-902, January.
    14. Ghassan, Hassan & Alhajhoj, Hassan, 2010. "الارتباط الحركي بين الاستثمار في مؤسسات القطاع الحكومي والاستثمار الخاص عبر نموذج التقهقر الذاتي البنيوي: حالة الاقتصاد السعودي [The Dynamic Relationship between the Investment in Public and Privat," MPRA Paper 54398, University Library of Munich, Germany.
    15. Ritu Rani & Naresh Kumar, 2016. "Does Fiscal Deficit Affect Interest Rate in India? An Empirical Investigation," Jindal Journal of Business Research, , vol. 5(2), pages 87-103, December.
    16. Asamoah, Lawrence Adu, 2016. "Fiscal Policy and Lending Rate Nexus in Ghana," MPRA Paper 80209, University Library of Munich, Germany.
    17. Ranjan Kumar Mohanty, 2016. "Does Fiscal Deficit Crowd Out Private Corporate Sector Investment In India?," The Singapore Economic Review (SER), World Scientific Publishing Co. Pte. Ltd., vol. 64(05), pages 1201-1224, November.
    18. Pandey, Rita & Gupta, Manish & Sachdeva, Paavani & Singh, Abhishek, 2020. "Biodiversity Conservation in India: Mapping Key Sources and Quantum of Funds," Working Papers 20/311, National Institute of Public Finance and Policy.
    19. Chakraborty, Lekha, 2012. "Determination of Interest Rate in India: Empirical Evidence on Fiscal Deficit-Interest Links and Financial Crowding Out," Working Papers 12/110, National Institute of Public Finance and Policy.
    20. Przekota Grzegorz & Lisowska Agnieszka, 2016. "The Reaction of Private Spending and Market Interest Rates to the Changes in Public Spending," Foundations of Management, Sciendo, vol. 8(1), pages 203-210, January.

    More about this item

    JEL classification:

    • 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
    • H62 - Public Economics - - National Budget, Deficit, and Debt - - - Deficit; Surplus

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:npf:wpaper:20/312. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: S.Siva Chidambaram The email address of this maintainer does not seem to be valid anymore. Please ask S.Siva Chidambaram to update the entry or send us the correct address (email available below). General contact details of provider: http://www.nipfp.org.in .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.