Empirical studies on the relationship between public and private investment and GDP growth

Abstract

This study performs empirical studies on the interaction between public and private investment and GDP growth for Japan and the USA. Since the data for each country used show features that are quite different from each other, empirical methods of GMM (Generalized Method of Moments) and OLS (Ordinary Least squares) are accordingly applied to Japan and the USA, respectively. The empirical results suggest that both public and private investment make great contributions to Japanese economic growth, while the US private investment seems to play a much more significant role than public investment.

Acknowledgements

I am in debt to Masatoshi Yamada, Charles Yuji Horioka, Yoshizo Hashimoto, Kanemi Ban, Alvin Ang and others for their useful comments and suggestions on earlier drafts of the paper. Any errors are the responsibility of my own.