The dynamic effects of public investments on private capital formation: Modelling a heterogeneous asymmetric cointegration with unobserved global factors

Gianni Carvelli

International Economics, 2024, vol. 177, issue C

Abstract: Using quarterly data on a panel of 14 OECD economies over 1960–2023, we model heterogeneously the nexus between public investments and private capital formation, allowing for asymmetric cointegration, fiscal feedback and addressing cross-sectional dependence. We find that: i) public investments crowd-in private investments in the short- and the long-run; ii) the private sector responds asymmetrically to expansions and reliefs in the flow of public capital; iii) the adjustments to the country-specific equilibrium paths depend on the way global shocks and local spillovers are modelled; iv) the effects of public investments could be partially offset if fiscal policy is used aggressively.

Keywords: Asymmetric cointegration; Cross-sectional dependence; Panel analysis; Private investments; Public investments (search for similar items in EconPapers)
JEL-codes: E62 H63 O47 (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:eee:inteco:v:177:y:2024:i:c:s2110701723000859

DOI: 10.1016/j.inteco.2023.100473

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