Public investments effect on the private investment in Brazil from 1971 to 2016: an empirical analysis using vector error correction model
International Journal of Development Research
Public investments effect on the private investment in Brazil from 1971 to 2016: an empirical analysis using vector error correction model
Received 27th June, 2019; Received in revised form 03rd July, 2019; Accepted 09th August, 2019; Published online 28th September, 2019
Copyright © 2019, Carlos Gilbert Conte Filho et al. This is an open access article distributed under the Creative Commons Attribution License, which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited.
This work aims to analyze whether the investments of public administrations complement or replace private sector investments in Brazil between 1971 and 2016. Using the Error Correction Vector Model methodology, the results show that the crowding in effect of government investments predominates under the investments of the private sector. The results of the econometric estimations suggest that a 1% increase in public sector investments causes a 1.33% increase in private sector investments. In addition, the results show that rising interest rates and instability negatively affect private sector investments, confirming the theory for the Brazilian economy in the period under review.
