Infrastructure, private expectations and investment

Jefferson S. Fraga () and Marco Flávio Resende

Brazilian Journal of Political Economy, 2022, vol. 42, issue 3, 678-696

Abstract: Economic literature has highlighted that infrastructure investment showspositive externalities which foster the economic growth. Based upon the Post-Keynesianperspective, the aims of this article are twofold: i) to explain the interactions amonginfrastructure, conventions, expectations and aggregate private investment, summarizedin what Keynes called technically social investment; ii) to show in theoretical terms thatdiscontinuities of infrastructure investments reduce the sensitivities of private aggregateinvestment in relation to its determinants, with economic policy implications. In the Post-Keynesian view, private investment is volatile and sensitive to changes in conventions andexpectations. We show that infrastructure spending stimulates private investments because itreduces uncertainty and coordinates the emergence of private conventions and expectationsthat foster private investments. JEL Classification: H54; O40; E20.

Keywords: Infrastructure; expectations; private investment; sensitivities (search for similar items in EconPapers)
Date: 2022
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