IDEAS home Printed from https://ideas.repec.org/p/usi/wpaper/416.html
   My bibliography  Save this paper

How Does Public Investment Affect Economic Growth in HIPC? An Empirical Assessment

Author

Listed:
  • Marianna Belloc
  • Pietro Vertova

Abstract

A better assessment of the impact of public investment on economic performance is crucial in order to design and implement effective fiscal policies for adjustment with growth in highly indebted poor countries. In this paper we investigate empirically the relationship between public investment, private investment and output, providing a dynamic econometric procedure on a selected group of Highly Indebted Poor Countries (HIPCs). Our results provide empirical support for both the crowding-in hypothesis and a positive effect of public investment on output.

Suggested Citation

  • Marianna Belloc & Pietro Vertova, 2004. "How Does Public Investment Affect Economic Growth in HIPC? An Empirical Assessment," Department of Economics University of Siena 416, Department of Economics, University of Siena.
    • Handle: RePEc:usi:wpaper:416
    as

    Download full text from publisher

    File URL: http://repec.deps.unisi.it/quaderni/416.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Serven,Luis, 1996. "Does public capital crowd out private capital? : evidence from India," Policy Research Working Paper Series 1613, The World Bank.
    2. H. Ahmed & SM. Miller, 2000. "Crowding‐out and crowding‐in effects of the components of government expenditure," Contemporary Economic Policy, Western Economic Association International, vol. 18(1), pages 124-133, January.
    3. Dhaneshwar Ghura & Barry Goodwin, 2000. "Determinants of private investment: a cross-regional empirical investigation," Applied Economics, Taylor & Francis Journals, vol. 32(14), pages 1819-1829.
    4. Gramlich, Edward M, 1994. "Infrastructure Investment: A Review Essay," Journal of Economic Literature, American Economic Association, vol. 32(3), pages 1176-1196, September.
    5. Johansen, Soren & Juselius, Katarina, 1990. "Maximum Likelihood Estimation and Inference on Cointegration--With Applications to the Demand for Money," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 52(2), pages 169-210, May.
    6. Mr. Dhaneshwar Ghura & Mr. Michael T. Hadjimichael, 1995. "Public Policies and Private Savings and Investment in Sub-Saharan Africa: An Empirical Investigation," IMF Working Papers 1995/019, International Monetary Fund.
    7. Joshua Greene & Delano Villanueva, 1991. "Private Investment in Developing Countries: An Empirical Analysis," IMF Staff Papers, Palgrave Macmillan, vol. 38(1), pages 33-58, March.
    8. Bacha, Edmar L., 1990. "A three-gap model of foreign transfers and the GDP growth rate in developing countries," Journal of Development Economics, Elsevier, vol. 32(2), pages 279-296, April.
    9. Sims, Christopher A, 1980. "Macroeconomics and Reality," Econometrica, Econometric Society, vol. 48(1), pages 1-48, January.
    10. Easterly, William & Rebelo, Sergio, 1993. "Fiscal policy and economic growth: An empirical investigation," Journal of Monetary Economics, Elsevier, vol. 32(3), pages 417-458, December.
    11. Khan, Mohsin S. & Reinhart, Carmen M., 1990. "Private investment and economic growth in developing countries," World Development, Elsevier, vol. 18(1), pages 19-27, January.
    12. Alfredo M. Pereira, 2001. "On the Effects of Public Investment on Private Investment: What Crowds in What?," Public Finance Review, , vol. 29(1), pages 3-25, January.
    13. Engle, Robert & Granger, Clive, 2015. "Co-integration and error correction: Representation, estimation, and testing," Applied Econometrics, Russian Presidential Academy of National Economy and Public Administration (RANEPA), vol. 39(3), pages 106-135.
    14. Aschauer, David Alan, 1989. "Does public capital crowd out private capital?," Journal of Monetary Economics, Elsevier, vol. 24(2), pages 171-188, September.
    15. Khan, Mohsin S. & Montiel, Peter & Haque, Nadeem U., 1990. "Adjustment with growth : Relating the analytical approaches of the IMF and the World Bank," Journal of Development Economics, Elsevier, vol. 32(1), pages 155-179, January.
    16. Miguel D. Ramirez, 1998. "Does Public Investment Enhance Productivity Growth in Mexico? A Cointegration Analysis," Eastern Economic Journal, Eastern Economic Association, vol. 24(1), pages 63-82, Winter.
    17. M. O. Odedokun, 1997. "Relative effects of public versus private investment spending on economic efficiency and growth in developing countries," Applied Economics, Taylor & Francis Journals, vol. 29(10), pages 1325-1336.
    18. Sushanta Mallick, 2001. "Dynamics of Macroeconomic Adjustment with Growth: Some Simulation Results," International Economic Journal, Taylor & Francis Journals, vol. 15(1), pages 115-139.
    19. Gonzalo, Jesus, 1994. "Five alternative methods of estimating long-run equilibrium relationships," Journal of Econometrics, Elsevier, vol. 60(1-2), pages 203-233.
    20. Alfredo M. Pereira, 2000. "Is All Public Capital Created Equal?," The Review of Economics and Statistics, MIT Press, vol. 82(3), pages 513-518, August.
    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. Thomas Chataghalala Munthali, 2012. "Interaction of public and private investment in Southern Africa: a dynamic panel analysis," International Review of Applied Economics, Taylor & Francis Journals, vol. 26(5), pages 597-622, September.
    2. Garikai Makuyana & Nicholas M. Odhiambo, 2019. "Public and private investment and economic growth in Malawi: an ARDL-bounds testing approach," Economic Research-Ekonomska Istraživanja, Taylor & Francis Journals, vol. 32(1), pages 673-689, January.
    3. Yongzheng Yang & Mr. Robert Powell & Mr. Sanjeev Gupta, 2005. "The Macroeconomic Challenges of Scaling Up Aid to Africa," IMF Working Papers 2005/179, International Monetary Fund.
    4. Garikai Makuyana & Nicholas M. Odhiambo, 2017. "Public and private investment and economic growth in Zimbabwe: An empirical test," Business and Economic Horizons (BEH), Prague Development Center, vol. 13(1), pages 60-76, March.
    5. Modeste, Nelson, 2024. "The Relative Effects of Public and Private Capital on Guyana's Economic Performance, 1980 to 2018: A Cointegration Analysis," Economia Internazionale / International Economics, Camera di Commercio Industria Artigianato Agricoltura di Genova, vol. 77(3), pages 463-482.
    6. Agénor, Pierre-Richard & Bayraktar, Nihal & El Aynaoui, Karim, 2008. "Roads out of poverty? Assessing the links between aid, public investment, growth, and poverty reduction," Journal of Development Economics, Elsevier, vol. 86(2), pages 277-295, June.
    7. Osmar Bolivar, 2022. "Multiplicadores Fiscales: Evidencia Empírica para una Asignación Costo-Efectiva de la Inversión Pública," Cuadernos de Investigación Económica Boliviana, Ministerio de Economía y Finanzas Públicas de Bolivia, vol. 5(2), pages 7-64, Diciembre.
    8. MAKUYANA, Garikai & ODHIAMBO, Nicholas M., 2018. "Public and Private Investment and Economic Growth in Zambia: A Dynamic Approach," Economia Internazionale / International Economics, Camera di Commercio Industria Artigianato Agricoltura di Genova, vol. 71(4), pages 503-526.
    9. Agenor, Pierre-Richard & Nabli, Mustapha K. & Yousef, Tarik M., 2005. "Public infrastructure and private investment in the Middle East and North Africa," Policy Research Working Paper Series 3661, The World Bank.
    10. Makuyana, Garikai & Odhiambo, Nicholas Mbaya, 2017. "Public and private investment and economic growth in South Africa:An empirical investigation," Working Papers 22005, University of South Africa, Department of Economics.
    11. Nishija Unnikrishnan & Thomas Paul Kattookaran, 2020. "Impact of Public and Private Infrastructure Investment on Economic Growth: Evidence from India," Journal of Infrastructure Development, India Development Foundation, vol. 12(2), pages 119-138, December.
    12. Pinto Moreira, Emmanuel & Bayraktar, Nihal, 2005. "A macroeconomic framework for quantifying growth and poverty reduction strategies in Niger," Policy Research Working Paper Series 3506, The World Bank.
    13. Osmar Bolivar, 2022. "Fiscal Multipliers: Empirical Evidence for a Cost-Effective Allocation of Public Investment," Cuadernos de Investigación Económica Boliviana, Ministerio de Economía y Finanzas Públicas de Bolivia, vol. 5(2), pages 1-28, December.

    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. Stephen S. Everhart & Mariusz A. Sumlinski, 2001. "Trends in Private Investment in Developing Countries : Statistics for 1970-2000 and the Impact on Private Investment of Corruption and the Quality of Public Investment," World Bank Publications - Books, The World Bank Group, number 13989.
    2. Ward Romp & Jakob De Haan, 2007. "Public Capital and Economic Growth: A Critical Survey," Perspektiven der Wirtschaftspolitik, Verein für Socialpolitik, vol. 8(S1), pages 6-52, April.
    3. Tan, Bee Wah & Tang, Chor Foon, 2011. "The dynamic relationship between private domestic investment, the user cost of capital, and economic growth in Malaysia," MPRA Paper 27964, University Library of Munich, Germany.
    4. Abbas, Aadil & Masih, Mansur, 2017. "Which investment (private or public) does contribute to economic growth more? a case study of South Africa," MPRA Paper 108919, University Library of Munich, Germany.
    5. Diego Martinez-Lopez, 2006. "Linking Public Investment to Private Investment. The Case of Spanish Regions," International Review of Applied Economics, Taylor & Francis Journals, vol. 20(4), pages 411-423.
    6. Sallahuddin Hassan & Zalila Othman & Mohd Zaini Abd Karim, 2011. "Private and Public Investment in Malaysia: A Panel Time-Series Analysis," International Journal of Economics and Financial Issues, Econjournals, vol. 1(4), pages 199-210.
    7. 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 –.
    8. Brinca, Pedro, 2006. "The impact of public investment in Sweden: A VAR approach," MPRA Paper 62132, University Library of Munich, Germany.
    9. Federici, Andrea, 2018. "Il rapporto tra capitale pubblico e altre variabili macroeconomiche: un'applicazione empirica [The relationship between public capital and other macroeconomic variables: an empirical application]," MPRA Paper 88516, University Library of Munich, Germany.
    10. Federici, Andrea, 2018. "Il rapporto tra capitale pubblico e altre variabili macroeconomiche: analisi della letteratura [The relationship between public capital and other macroeconomic variable: a literature review]," MPRA Paper 88515, University Library of Munich, Germany.
    11. Ahmed Badawi, 2003. "Private capital formation and public investment in Sudan: testing the substitutability and complementarity hypotheses in a growth framework," Journal of International Development, John Wiley & Sons, Ltd., vol. 15(6), pages 783-799.
    12. Ari, Ibrahim & Akkas, Erhan & Asutay, Mehmet & Koç, Muammer, 2019. "Public and private investment in the hydrocarbon-based rentier economies: A case study for the GCC countries," Resources Policy, Elsevier, vol. 62(C), pages 165-175.
    13. Lutfi Erden & Randall G. Holcombe, 2006. "The Linkage Between Public and Private Investment: A Co-integration Analysis of a Panel of Developing Countries," Eastern Economic Journal, Eastern Economic Association, vol. 32(3), pages 479-492, Summer.
    14. Garikai Makuyana & Nicholas M. Odhiambo, 2019. "Public and private investment and economic growth in Malawi: an ARDL-bounds testing approach," Economic Research-Ekonomska Istraživanja, Taylor & Francis Journals, vol. 32(1), pages 673-689, January.
    15. Eleni Constantinou & Avo Kazandjian & Georgios P. Kouretas & Vera Tahmazian, 2008. "Common Stochastic Trends Among The Cyprus Stock Exchange And The Ase, Lse And Nyse," Bulletin of Economic Research, Wiley Blackwell, vol. 60(4), pages 327-349, October.
    16. Fedderke, J.W. & Bogetic, Z., 2009. "Infrastructure and Growth in South Africa: Direct and Indirect Productivity Impacts of 19 Infrastructure Measures," World Development, Elsevier, vol. 37(9), pages 1522-1539, September.
    17. Aka, F.B. & Decaluwé, B., 1999. "Causality and Comovement between Tax Rate and Budget Deficits: Further Evidence from Developing Countries," Cahiers de recherche 9911, Université Laval - Département d'économique.
    18. Fedderke, J.W. & Perkins, P. & Luiz, J.M., 2006. "Infrastructural investment in long-run economic growth: South Africa 1875-2001," World Development, Elsevier, vol. 34(6), pages 1037-1059, June.
    19. Syed Ammad & Qazi Masood Ahmed, 2014. "Dynamic Effects of Energy Sector Public Investment on Sectoral Economic Growth: Experience from Pakistan Economy," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 53(4), pages 403-421.
    20. Yongzheng Yang & Mr. Robert Powell & Mr. Sanjeev Gupta, 2005. "The Macroeconomic Challenges of Scaling Up Aid to Africa," IMF Working Papers 2005/179, International Monetary Fund.

    More about this item

    Keywords

    Fiscal adjustment; public investment; crowding-in; Highly Indebted Poor Countries (HIPCs).;
    All these keywords.

    JEL classification:

    • O23 - Economic Development, Innovation, Technological Change, and Growth - - Development Planning and Policy - - - Fiscal and Monetary Policy in Development
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory

    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:usi:wpaper:416. 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: Fabrizio Becatti (email available below). General contact details of provider: https://edirc.repec.org/data/desieit.html .

    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.