The impact of public investment on private investment:A disaggregated analysis

Abstract

In this paper, the Dynamic model is explored to analyse the behaviour of private and public investment. The overall picture along with the disaggregated analysis seems to be quite useful in concluding the debate about crowding-out of private investment due to increase in public investment. The dynamics of overall public investment, private investment, and GDP are explored along with the analysis of commodity-producing sectors (agriculture and manufacturing) of the economy. Structural unrestricted VAR model is estimated for probing the dynamics of public investment in private capital formation and economic growth for the period 1973-2006. Results from the agriculture sector support the crowding-in phenomenon where as manufacturing sector is characterised by the crowding-out phenomenon. Overall results do not in provide any significant conclusions.