Private and Givernment Investment: A Study of Three OECD Countries

Abstract

This paper examines the relationship between private investment and government spending in Australia, Britain and the United States. Since all time series data are stationary in first difference and cointegrated, these series are represented by an error correction model. Variance decomposition and impulse response functions are employed to investigate the effects of government spending on private investment. Generally the empirical results provide limited support for "crowding out" effects of government investment on private investment. The rate of interest and the corporate profit ability showed significant effects on private investment in two out of three cases. [E62, E63]

^*This paper was presented in seminars at the University of Kent and the University of Southamption. The authors would like to thank Alan Carruh, Andy Dickerson, Lance Fisher, Owen O'Donnell, Peter Sanfey, Tony Thirlwall and participants in both seminars for their valuable comments.

^*This paper was presented in seminars at the University of Kent and the University of Southamption. The authors would like to thank Alan Carruh, Andy Dickerson, Lance Fisher, Owen O'Donnell, Peter Sanfey, Tony Thirlwall and participants in both seminars for their valuable comments.

Notes

^*This paper was presented in seminars at the University of Kent and the University of Southamption. The authors would like to thank Alan Carruh, Andy Dickerson, Lance Fisher, Owen O'Donnell, Peter Sanfey, Tony Thirlwall and participants in both seminars for their valuable comments.