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Crowding Out: An Empirical Note

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  • Cebula, Richard

Abstract

This study investigates whether there is empirical evidence that federal budget deficits in the U.S. actually lead to the crowding out of private investment in new plant and equipment. Several specifications are undertaken. Each of these estimations finds that private investment is apparently crowded out as a result of federal budget deficits. Also, it has been found here that this crowding-out phenomenon may have an important inflationary impact on the economy. This inflationary impact is presumably caused through a reduction in the rate at which productive capacity expands.

Suggested Citation

  • Cebula, Richard, 1977. "Crowding Out: An Empirical Note," MPRA Paper 54515, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:54515
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    File URL: https://mpra.ub.uni-muenchen.de/54515/1/MPRA_paper_54515.pdf
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    References listed on IDEAS

    as
    1. Fromm, Gary & Klein, Lawrence R, 1973. "A Comparison of Eleven Econometric Models of the United States," American Economic Review, American Economic Association, vol. 63(2), pages 385-393, May.
    2. David, Paul A & Scadding, John L, 1974. "Private Savings: Ultrarationality, Aggregation, and "Denison's Law."," Journal of Political Economy, University of Chicago Press, vol. 82(2), pages 225-249, Part I, M.
    3. Keith M. Carlson & Roger W. Spencer, 1975. "Crowding out and its critics," Review, Federal Reserve Bank of St. Louis, vol. 57(Dec), pages 2-17.
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    Cited by:

    1. D. Giannaros & B. Kolluri & M. Panik, 1999. "An Empirical Analysis of The Effects of Government Spending on Capital Investment: Evidence from O.E.C.D. Countries," International Economic Journal, Taylor & Francis Journals, vol. 13(1), pages 45-55.
    2. Cebula, Richard, 1979. "Crowding Out: An Empirical Note: Reply," MPRA Paper 56629, University Library of Munich, Germany.

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    More about this item

    Keywords

    budget deficits; crowding out; investment in new plant and equipment; inflation;
    All these keywords.

    JEL classification:

    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G31 - Financial Economics - - Corporate Finance and Governance - - - Capital Budgeting; Fixed Investment and Inventory Studies
    • H62 - Public Economics - - National Budget, Deficit, and Debt - - - Deficit; Surplus

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