Private and Government Investment: A Study of Three Oecd Countries

Monadjemi, Mehdi; Huh, Hyeon-seung

doi:10.1080/10168739800080015

Cited by 11 publications

(12 citation statements)

References 16 publications

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“…Ramirez (1994) and Ouattara (2004) in their individual study revealed the expansionary or crowding-in effects of budget deficit on economic growth in Mexico and Senegal respectively. Using error correction model on quarterly data over the period 1970:1-1991:4 of Australia, UK and USA Monadjemi and Huh (1998) found negligible negative effect of government expenditure on private investment. Aschauer (1989b) examined the impact of public expenditure on private investment using annual time series data of US covering the period from1953 to 1986 and the empirical results indicated positive link running from public investment to private investment thus crowding-in effects.…”

Section: Review Of Empirical Studiesmentioning

confidence: 99%

Does Budget Deficit Impede Economic Growth? Evidence from Bangladesh

Biplob¹

2019

JOMEINO

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The purpose of this study is to investigate the impacts of budget deficit on economic growth in Bangladesh over the period of 1981-2017. This study employed the autoregressive distributed lag (ARDL) model to capture long-run cointegration along with longrun and short-run elasticity of the explanatory variables. Moreover, directional causalities between the variables used in this study have been checked using vector error correction model (VECM). The results of the analysis under ARDL model revealed that in case of Bangladesh, budget deficit positively affects economic growth both in long-run and short-run while government total expenditures lead to increase GDP only in long-run. These findings support the Keynesian proposition that budget deficits crowd-in private investments resulting economic growth. Furthermore, directional causality tests conducted using VECM explored unidirectional causality running from budget deficit to economic growth while feedback causality has been found between governments total expenditures and economic growth. For policy implications, this research provides evidence that in an emerging economy like Bangladesh, government spending through deficit financing can drive positively in the level of economic growth. Bangladesh, however, should not have the luxury of forgetting about the bad consequences of consistent and gradually increasing budget deficit at all.

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Section: Review Of Empirical Studiesmentioning

confidence: 99%

Does Budget Deficit Impede Economic Growth? Evidence from Bangladesh

Biplob¹

2019

JOMEINO

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“…, Ereburge and Woher (1995) and Monadjemi and Huh (1998), whereas, provided evidences that are robust to the complementarity hypothesis i.e., public investment crowds in private investment via improving the productivity of the private capital.…”

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confidence: 95%

Public / Private Investment Linkages: A Multivariate Cointegration Analysis

Rashid¹

2022

pdr

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The issue of whether public investment crowds out or crowds in private investment has received considerable attention in the economic literature. Most of the empirical studies that examined the long run stable association between public and private investment have focused on examining this relationship for the developed countries with very little attention on the developing countries. The empirical results of these studies, however, are highly controversial. The existing empirical studies in this area can be divided into three categories. The studies in the first category including Barro (1974), Kormendi (1983), and Feldstein (1982) have examined the empirical implications of the Ricardian equivalence hypothesis (REH). The empirical results of most of the studies in this category were supportive of the REH. Seater (1993) argues that good empirical studies generally provide evidence in support of the REH; however, some studies refute it owing to the lake of econometric accuracy.

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“…530-31). Monadjemi and Huh (1998) utilised the error correction model (ECM) to examine the relationship between private investment and government spending in Australia, UK, and the US over the period 1970:1-1991:4. Empirical results provide limited support for "crowding out" effects of government investment on private investment.…”

Section: Deficits Crowding-out and Crowding In Effects Of Public Expmentioning

confidence: 99%

“…Ghali (1998) 1963-93 Tunisia Granger causality test, OLS -Public investment is found to have a negative short-run impact on private investment and a negative longrun impact on both private investment and economic growth. Monadjemi and Huh (1998) 1960-1991 Australia, UK, US ECM -The empirical results provide limited support for "crowding out" effects of government investment on private investment. Ahmed and Miller (2000) 1975-1984 Cross sectional (39) OLS -In general, tax-financed government expenditure crowds out more investment than debt-financed expenditure.…”

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confidence: 99%

The Budget Deficit and Economic Performance: A Survey

Saleh

Harvie

2005

Singapore Econ. Rev.

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The relationship between budget deficits and macroeconomic variables (such as growth, interest rates, trade deficit, exchange rate, among others) represents one of the most widely debated topics among economists and policy makers in both developed and developing countries. However, the purpose of this paper is to examine the extensive literature to such a relationship, concentrating on theoretical debates, empirical studies, and econometric models in order to derive substantive conclusions, which can be beneficial in terms of macroeconomics area or in terms of constructing or developing a macroeconomic model for analysing the impact of budget deficits on macroeconomic variables. The majority of these studies regress a macroeconomic variable on the deficit variable. These studies are cross-country and utilise time series data. In general the key outcomes from the studies presented in this paper indicated that both the method of financing and the components of government expenditures could have different effects. Therefore, it is crucial to distinguish between current and capital expenditure when evaluating the impact of fiscal policy on private investment and output growth. Even though, the overall results from the empirical literature with respect to the impact of public investment on private investment and growth are ambiguous, the bulk of the empirical studies finds a significantly negative effect of public consumption expenditure on growth, while the effects of public investment expenditure are found to be positive although less robust. The key outcome from all of the studies presented in this paper which investigating the relationship between the budget deficit and current account deficit showed strong evidence in both developed and developing countries towards supporting the Keynesian proposition (conventional view) which suggests that an increase in the budget deficit would induce domestic absorption and, hence import expansion, causing a current account deficit. Furthermore, it can also be concluded from the empirical findings that the effects of budget deficits on exchange rates depends on the way of funding the deficits, whether through taxation or through money growth. The key findings from the empirical studies investigating the relationship between the budget deficit and interest rates indicated strong evidence towards supporting the Keynesian model of a significant and positive relationship between budget deficits and interest rates. The major outcomes from the empirical studies examining the relationship between budget deficits and inflation showed strong evidence that the budget deficit financed through monetisation and a rising money supply could lead to inflation. * I would like to thank A/P Charles Harvie and A/P Edgar J Wilson for their helpful comments and suggestions.

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Private and Government Investment: A Study of Three Oecd Countries

Cited by 11 publications

References 16 publications

Does Budget Deficit Impede Economic Growth? Evidence from Bangladesh

Does Budget Deficit Impede Economic Growth? Evidence from Bangladesh

Public / Private Investment Linkages: A Multivariate Cointegration Analysis

The Budget Deficit and Economic Performance: A Survey

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