Macroeconomic Rates of Return of Public and Private Investment: Crowding-In and Crowding-Out Effects

ECB Working Paper No. 864

Manchester School, Vol. 77, No. S1, pp. 21-39, 2009

56 Pages Posted: 26 Feb 2008

See all articles by António Afonso

António Afonso

University of Lisbon - ISEG (School of Economics and Management); UECE (Research Unit on Complexity and Economics); ISEG Lisbon School of Economics and Management,Universidade de Lisboa

Miguel St. Aubyn

Technical University of Lisbon - ISEG (School of Economics and Management); UECE (Research Unit on Complexity and Economics)

Date Written: February 2008

Abstract

Using annual data from 14 European Union countries, plus Canada, Japan and the United States, we evaluate the macroeconomic effects of public and private investment through VAR analysis. From impulse response functions, we are able to assess the extent of crowding-in or crowding-out of both components of investment. We also compute the associated macroeconomic rates of return of public and private investment for each country. The results point mostly to the existence of positive effects of public investment and private investment on output. On the other hand, the crowding-in effects of public investment on private investment vary across countries, while the crowding-in effect of private investment on public investment is more generalised.

Keywords: Fiscal policy, public investment, private investment, impulse response, vector autoregression, European Union

JEL Classification: C32, E22, E62

Suggested Citation

Afonso, António and St. Aubyn, Miguel, Macroeconomic Rates of Return of Public and Private Investment: Crowding-In and Crowding-Out Effects (February 2008). ECB Working Paper No. 864, Manchester School, Vol. 77, No. S1, pp. 21-39, 2009 , Available at SSRN: https://ssrn.com/abstract=1090278

António Afonso (Contact Author)

University of Lisbon - ISEG (School of Economics and Management) ( email )

R. Miguel Lupi, 20
Lisbon, 1248-078
Portugal
+351 21 392 5985 (Phone)
+351 21 396 6407 (Fax)

HOME PAGE: http://https://www.iseg.ulisboa.pt/aquila/homepage/aafonso

UECE (Research Unit on Complexity and Economics)

Rua Miguel Lupi 20
Lisbon, 1249-078
Portugal
+351-213 925 912 (Phone)
+351-213 971 196 (Fax)

HOME PAGE: http://https://uece.rc.iseg.ulisboa.pt/

ISEG Lisbon School of Economics and Management,Universidade de Lisboa ( email )

Rua do Quelhas 6
LISBOA, 1200-781
Portugal

Miguel St. Aubyn

Technical University of Lisbon - ISEG (School of Economics and Management) ( email )

Rua do Quelhas, 6
1200-071 Lisboa
Portugal
+351 21 392 5987 (Phone)

HOME PAGE: http://www.iseg.utl.pt/~mstaubyn

UECE (Research Unit on Complexity and Economics)

ISEG/UTL, Rua Miguel Lupi 20
1249-078 Lisboa
Portugal
+351-213 925 912 (Phone)
+351-213 971 196 (Fax)

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